LOOKING SQUARELY AT 



THE WATER POWER 



PROBLEM 



OUR refusal to develop our wasting water 
powers constitutes the strangest feature 
of our National conduct. For the greater part, 
our water powers arc Idly wasting their energy. 
The reason is that we have not yet been per- 
suaded to enact laws under which money 
may confidently be invested in them. Until 
we do this, our waiter powers will be as useless 
to us as though situated on another planet 



HEN*Y J. PIRRCt 
fcATTLE. WASHINGTON 




CopigMW— 



COPYRIGHT DEPOSIT. 



LOOKING SQUARELY AT 

THE WATER POWER 

PROBLEM 



/^\UR refusal to develop our wasting water 
^ powers constitutes the strangest feature 
of our National conduct. For the greater part, 
our water powers are idly wasting their energy. 
The reason is that we have not yet been per- 
suaded to enact laws under which money 
may confidently be invested in them. Until 
we do this, our water powers will be as useless 
to us as though situated on another planet. 



HENRY J. PIERCE 
SEATTLE, WASHINGTON 



«s 



s~o, 



'CI.A414085 



OCT 18 1915 



CONTENTS 



PAGE 

Explanation of Purpose 7 

How the Nation Is Concerned 9 

The Practical Side of the Question 16 

What Are We Quarreling About? 24 

Who Pays for Unfair and Restrictive Legislation? 35 

The Water Power Business and Its Risks 41 

Water Power Ownership and Control 45 

Water Power Legislation 48 

Conclusion 62 

Appendix A — Comparative Review of Adamson Bill and 

Adamson-Shields Bill 67 

Appendix B — Comparative Review of Public Lands Water 

Power Bills 72 

Appendix C — The Adamson-Shields Bill 83 

Appendix D — The Ferris-Myers Bill 119 

Appendix E — The Jones Bill 137 

Appendix F— The Works Bill 149 

Appendix G— The Smoot Bill 162 



LIST OF ILLUSTRATIONS 



OPPOSITE 
PAGE 

Plates la to lb— IN THE NAME OF CONSERVATION. 
Plate la — Navigation Dam and Power Plant at Lock 1.2, 

Coosa River, Alabama 8 

Plate lb — The Lock 18 Site, Coosa River, Alabama 8 

Plate Ic — Power Plant of Ontario Power Company, Niag- 
ara Falls. (Exterior) 8 

Plate Id — Power Plant of Ontario Power Company, Niag- 
ara Falls. (Interior) 8 

Plate Ie — Nitrogen Plant of the American Cyanamid Co., 

Niagara Falls, Ontario 8 

Plate Ha — The Rjukan Power Plant at Vemork, Norway. . 10 

Plate lib — The Nitrogen Plant at Saarheim, Norway 10 

Plate Ilia — Denver & Rio Grande Train Crossing Soldiers 

Summit, Utah 14 

Plate 111b — Ore Train on Butte, Anaconda & Paeifie Rail- 
way, Montana 14 

Plate IV — Water Power and Irrigation 18 

Plate V— A Glimpse at What Might Be 22 

Plate VI — The Electron Power Plant, Puyallup River, 

Washington 26 

Plate VII— Water Power and Live Stock 34 

Plate VIII — Hydro-Electric Power in the Portland Cement 

Industry 40 

Plate IX — Hydro-Electric Power in Irrigation 44 

Plate X— Blewett's Fall Dam, Yadkin River, North 

Carolina 48 

Plate XI — All Farmers Are Not Equal Before the Law ... 52 

Plate XII — Water Power and Highways 56 

Plate XIII — A Desert Reclaimed with Water Pumped by 

Hydro-Electric Power 60 

Plate XIV — Hydro-Electric PoAver in the Mining Industry 66 



"At every waterfall two angels stay, 

One clothed in rainbows, the other veiled in spray. 

The first the beauty of the scene reveals, 

The last revolves the mighty water wheels, 

And there those white-robed sisters ever stand, 

Beauty and Utility, hand in hand" 



LOOKING SQUARELY AT THE WATER 
POWER PROBLEM 



To Members of Congress : 

This is a personal appeal for water power legislation. The 
author confesses that he has an old-fashioned ambition to do a 
constructive thing — to assist in the creation of an industrial 
opportunity in a neglected place and to make homes on land now 
silent. He also cherishes a hope of reasonable and wholesome 
reward. These are two honorable incentives which have, from the 
beginning of things, animated individual effort. Some people re- 
gard such motives distrustfully but it cannot be believed that such 
sentiments which, if manifested in an earlier day, would have 
impeded or stifled our greatest commercial achievements, will long 
survive in the present day. Therefore, the author will state his 
case in all frankness and be confident that those who cannot accept 
his conclusions will have no reason to misconstrue his purpose. 

The author is one who, seeing a development opportunity, 
thought it good and praiseworthy to invest therein. This oppor- 
tunity comprises agriculture, industrial plants, transportation, 
cities and towns, homes, schools and churches — in short just that 
sort of opportunity which, pursued in colonial days, made this 
Nation an actual thing. All this forward movement is con- 
tingent on the development of water power. The wisest commer- 
cial minds of the country have endorsed this project, yet the 
author is unable to raise money for its development. Those who 
would, under ordinary conditions, gladly lend their money, point 
to only one vital defect. The power site is on a navigable river 
and the United States controls the situation, because it has the 
sovereign right to withhold its approval to any development on 
navigable waters. The Government cannot and will not make 



8 THE WATER POWER PROBLEM 

the development itself, and the Federal laws under which the 
United States can grant the privilege to private initiative are so 
restrictive and unbusinesslike that no one is willing to risk his 
money. This is a strange situation. Believing that it could not 
logically persist, the author has spent the past two years in a 
study of the matter, both in Europe and in America. He has 
conferred with business men, bankers, lawyers, engineers and pub- 
lic officials of all parties and prejudices. The following state- 
ment is a resume of the results of that experience. It is sent to 
Members of Congress and others in authority in the hope that it 
will be of service. 

It is inevitable that the water power question must soon be 
dealt with by Congress. Unless that dealing is wise and business- 
like, the effort will be useless. As will later be shown, the water 
power business involves a multitude of investment risks. There 
are nearly 5,000 standard investment securities for sale in the 
open market. The water power business must compete for money 
with all of these other standard investments. It ought to be ap- 
parent that any water power law under Avhich an invested dollar 
is inevitably doomed to depreciation will not encourage water 
power development. If, in considering legislation, our law-mak- 
ers, while protecting fully the public interest, will at the same 
time apply the homely and familiar rules of honest business and 
will searchingly test each section of a legislative bill by deter- 
mining whether, under the terms proposed, they would be willing 
to invest their own money, or were they executors of an estate, 
the money held by them in trust, the path to power development 
and all its manifold benefits will be greatly smoothed. 




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HOW THE XATIOX IS CONCERNED 



To foster and encourage water power development is a National 
duty. This is so for two reasons : First, every bit of material 
progress that the world has made has been the result of man's 
nsing some form of energy, and the greater and better and 
cheaper the energy, the greater and better has been the progress ; 
second, water power is our greatest and best and nsnally our 
cheapest source of energy. In this country, onr water powers are 
our greatest natural resource. Much of that power now wasting 
to the sea could be developed for our immediate benefit. Xo man 
can claim that he is unconcerned, for the cost of his food and his 
clothing, the comfort of his shelter and the convenience and facil- 
ity of his journeyings are all prejudicially affected by the failure 
to develop water power to the utmost limit of its usefulness. The 
fact that in some regions there may be no water power opportunity 
does not alter the foregoing, because even in such places the price 
of the things that man consumes or uses in his everyday life is 
controlled by the price at which those things can be produced 
under the best and cheapest of conditions. The farmer on the 
Kansas prairie is as much concerned with water power develop- 
ment as is the manufacturer at the Falls of Niagara. 

Let us consider the farmer. His principal commercial interest 
is in his crops. He is needing more and more fertilizer. Try as he 
will, he does not make his fields produce the values that farms do 
in Great Britain or France, in Germany. Belgium, Holland, Swe- 
den or Norway. Why is it that the fields of Great Britain produce 
two and one-half times as much wheat per acre as do those in the 
United States? TVhy is it that on an acre of land, the Dutch 
farmer produces twice as much barley, the Belgian farmer twice 



10 THE WATER POWER PROBLEM 

as much oats and the German farmer nearly twice as much rye as 
does the American farmer on his fields? The answer is fertilizer. 
German experiments have shown that by the addition of 2,075,000 
tons of nitrogen to the soil of the Empire, additional crops have 
been obtained amounting to 63,300,000 tons. Does this suggest 
anything concerning the cost of living? Let us compare the use 
of fertilizer in four different countries in 1911 : 

Lbs. of fertilizer used 
Country per acre of improved land 

Belgium 448 

Germany 214 

Great Britain 152 

United States 28 

The foregoing statement does not show up very well for the 
United States, yet that little 28 pounds per acre meant the con- 
sumption of 6,800,970 tons of fertilizer in 1913, for which the 
farmer paid $170,000,000. In that year, our importation of fer- 
tilizer ingredients amounted to $49,622,000. Where are we going 
to get our fertilizer when we boost our crop yields up to the level 
of Great Britain, Germany and Belgium? Boost we must, for our 
population is increasing, and it will easily mean an annual con- 
sumption of 50,000,000 tons of fertilizer. More detailed informa- 
tion concerning fertilizer and its ingredients and manufacture 
will be given in a subsequent chapter. The immediate purpose is 
to emphasize the fact that even under the present limited use of 
fertilizer, we are unable to produce all that we require and are 
obliged to make large importations ; that there is no need for im- 
porting any nitrogen because if Federal water power laws could 
be passed which will suitably provide a safe financial basis 
of investment, all the fertilizer that the country requires and much 
more for export purposes can be cheaply made by utilizing our 




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HOW THE NATION IS CONCERNED 11 

water powers to extract nitrogen from the air. So it is that the 
farmer is enormously interested in water power from the fertilizer 
standpoint, and because this interest has to do with food produc- 
tion, every citizen of the country is likewise affected. 

But the farmer's interest does not stop with fertilizer. As will 
subsequently be explained, it extends to irrigation in the arid 
West, to the transportation of farm products and farm supplies, 
including implements and clothing; and in the water power re- 
gions, the farmer's interest extends to hydro-electric energy in 
farming operations. In like manner, we might consider every 
other vocation and show how closely water power benefits in a 
large degree control them. Water power is an individual matter, 
a community matter, a national matter and, finally, the most im- 
portant commercial matter now before the people. The water 
power is ours to develop if we only will. The farmer who indulges 
in day dreams when he should be harvesting crops is not highly 
regarded by the community. What then shall be isaid of the Nation 
that follows a similar practice with respect to water power de- 
velopment? 

Wherever the United States has control, water power develop- 
ment is stagnant. This fact is well known by all who are con- 
versant with the situation, and it has been officially announced 
by members of the Cabinet and members of both Houses of Con- 
gress on many occasions. It means that under present laws it is 
practically impossible to develop water power sites that exist on 
the navigable streams of the country or on the public lands of the 
West. Water power sites on the navigable streams do not belong 
to the Government except in those very rare cases where land has 
been acquired by the Government for purposes of navigation. The 
land is, as a rule, in private ownership, and under the "Riparian 
Doctrine," which prevails in the East, the ownership of land car- 
ries with it the right to use the water in the adjacent navigable 



^12 THE WATER POWER PROBLEM 

streams. Such use, however, is contingent upon the paramount 
use of the streams for navigation, and as the Federal Government 
has supreme authority over navigation in our rivers, it follows 
that no obstruction such as a dam or any other water power struc- 
ture can be placed in such a stream without the consent of the 
Federal Government. Therefore, the Government is in supreme 
control, though not necessarily owning a foot of land. The United 
States controls power sites of the West in enormous aggregate 
capacity through OAvnership of land. The control is, therefore, not 
begotten of sovereign authority, as in the case of navigable streams, 
but is precisely the same as that which any individual would 
possess who owned land necessary to a water power development. 
The situation is further complicated by the fact that these Western 
lands of the Government do not usually carry rights to the use 
of water in adjoiniDg streams, as is the case under the Riparian 
Doctrine of the East, but such rights are acquired under 
what is known as the Doctrine of Prior Appropriation, which 
means essentially that he who first appropriates the water and 
applies it to a beneficial use secures a vested right therein (so long 
as, and to the extent it is actually used) which can be exercised to 
the detriment, if need be, of those who made subsequent water ap- 
propriations. The Avater of the Western streams belongs to the 
States and not to the Federal Government, and the fact that the 
latter holds title to the land does not give it sovereign or even pro- 
prietary control over the waters. In practically all the arid States, 
the holder of a State water appropriation can, where physical con- 
ditions permit, divert the water from and carry it around Govern- 
ment, or any other land, and use it for all public beneficial pur- 
poses, but without the State water appropriation, the mere owner- 
ship of land by the Government, or anyone else, gives of itself 
absolutely no right to appropriate the State's water. The water, 
therefore, is the important thing and in all developments involving 



HOW THE NATION IS CONCERNED 13 

water appropriations the land is appurtenant to the water right, 
which is quite the reverse of the situation in the East where, 
under the Kiparian Doctrine, water is appurtenant to the land. 

There is a strange contradiction in the present Federal policy 
with respect to Western development and Federal laws providing 
for the occupation of Western lands and conveying rights of way 
over them, discriminate against water poAver development. Land 
for railroad purposes can be secured merely by constructing the 
railroad; land for county roads and highways is freely given; 
land for irrigation ditches can be acquired merely for the asking. 
Under the so-called "Carey Act,' 7 millions of acres have been 
turned over to the States and thence to private citizens on the 
sole condition that they shall be reclaimed. It is only in case 
land is wanted for water power development that the laws close 
down and say, "No, you cannot get titles to this land at any price 
and you cannot use it except on terms that make financing of your 
project impossible." It makes no difference if the right-of-way for 
power purpoises over Government land is required by the State, a 
municipality, an irrigation district or an individual ; it makes no 
difference whether the power is for a public use and is to be 
developed under complete sovereign control or is for a private use ; 
it makes no difference how vital the development may be for the 
prosperity and general well-being of a struggling Western com- 
munity — the strong hand of might says, "No; nothing doing." 
There surely can be nothing discreditable in the attempt to develop 
water power. Indeed, its benefits are in many cases more widely 
distributed than those of any other line of development. Yet the 
door is closed. 

Some have said that there is no water poAver stagnation and in 
their attempts to prove their statements, they point to large power 
developments that have taken place in this country during the 
past few years. A little inquiry will, however, develop the fact 



14 THE WATER POWER PROBLEM 

that these recent developments have almost all occurred on private 
lands or in situations over which the Federal Government has no 
control. Is it not a humiliating fact that if one desires to develop 
a modern industry, to increase and to facilitate public service and 
public convenience, to give employment to idle hands and to ac- 
complish all of the other beneficial things that are a part of 
national progress, he must, under present laws and policies, care- 
fully avoid all of those sites and locations which are, even in the 
smallest degree, in the ownership and control of the Federal 
Government? 

Conservation has often been defined as "wise use." The present 
embargo on water power development is maintained in the name 
of Conservation. The President must have had this and related 
facts in mind when, in his address to the Sixty-third Congress at 
the opening of its Third Session in December, 1914, he made this 
statement : 

"We have year after year debated, without end or conclusion, the 
best policy to pursue with regard to the use of the ores and forests 
and water powers of our national domain in the rich States of the 
West, when we should have acted; and they are still locked up. The 
key is still turned upon them, the door shut fast at which thousands 
of vigorous men, full of initiative, knock clamorously for admittance. 
The water power of our navigable streams outside the national domain 
also, even in the Eastern States, where we have worked and planned 
for generations, is still not used as it might be, because we will 
and we won't; because the laws we have made do not intelligently 
balance encouragement against restraint. We withhold by regulation." 

We may possess the highest and most devoted faith in the prin- 
ciples of Conservation and at the same time concur in the state- 
ment made by former President Taft to the Third Conservation 
Congress in 1912, as follows : 

"I am bound to say that the time has come for a halt in general 
rhapsodies over Conservation, making the word mean every known 
good in the world; for after the public attention has been roused, such 
appeals are of doubtful utility and do not direct the public to the 




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HOW THE NATION IS CONCERNED 15 

specific course that the people should take, or have their legislators 
take, in order to promote the cause of Conservation. The arousing 
of emotions on a subject like this, which has only dim outlines in the 
minds of the people affected, after a while ceases to be useful, and the 
whole movement will, if promoted on these lines, die for want of 
practical direction and of demonstration to the people that practical 
reforms are intended * * *." 



THE PRACTICAL SIDE OF THE 
QUESTION 



The following estimate taken from the U. S. Geological Survey 
Report of 1909 shows the available water horsepower in the differ- 
ent sections of the United States, if developed to the practicable 
maximum without storage: 

North Atlantic States 4,910,000 

South Atlantic States 5,107,000 

North Central States 4,270,000 

South Central States 3,342,000 

Western States 44,049,000 

Total available potential horsepower. . .61,678,000 

It is also estimated that with practicable maximum storage, the 
total available water horsepower that could be produced in the 
United States would be 200,000,000. The present actual Avater 
poAver development in the United States is about 6,000,000 horse- 
poAver, or l-10th of the amount available Avithout storage and 
l-30th of the amount available with storage. 

The Geological Survey Report for the year 1913 shoAvs that 
our consumption of coal for all purposes Avas about 570,048,125 
short tons, of which the railroads alone used about 20 per cent. In 
addition to this, the petroleum used in 1913 Avas equivalent to 
24,000,000 tons of coal. Every Avater horsepoAver noAV going to 
AATiste which could be economically substituted for fuel power 
Avould represent approximately 5% tons of coal per year, based on 
an average of 12 hours per day. To indicate what are the possi- 
bilities of conserA T ation along this line, Ave need merely to reflect 
upon the fact that the ultimate development of 61,678,000 horse 



THE PRACTICAL SIDE OF THE QUESTION 17 

power on the foregoing coal consumption basis, is equivalent to 
the annual use of nearly 340,000,000 tons of coal, which at $2.00 
per ton, represents an annual value of $680,000,000. Under 
conditions of practicable maximum storage, and a development 
of 200,000,000 horse power, the equivalent would be 1,200,000,000 
tons of coal, and $2,400,000,000 annually. If all the water at 
these power sites were used constantly, the foregoing coal con- 
sumption figures would be doubled. Of course, this represents 
the maximum attainable development, which, in all probability, 
will not be approached for a long period, but it also represents 
the end which may finally be achieved. It is certain, however, 
that unless a start is made by the enactment of fair and practical 
legislation, efforts to accomplish this much to be desired result, 
even in small part, will fail. Does not the possibility of so tre- 
mendous a saving of our exhaustible coal supply suggest that the 
attitude of the Government should at least be more than sympa- 
thetic toward the development of our water powers? Every unde- 
veloped water power for which a market now exists represents 
a willful waste of an exhaustible natural resource. 

Conservation, about which we have heard so much, does not 
mean merely the wise and economical use of a resource like coal. 
It means the saving of that exhaustible store in all places Avhere 
an inexhaustible resource, like water power, can be substituted for 
coal. Every time the United States has, by the exercise of its 
present policy of stagnation, prevented the development of a water 
power, it has not alone prevented the growth of cities, or the mak- 
ing of homes on the land; not alone has it discouraged the expan- 
sion of industries or driven them to other lands. These results, un- 
fortunate and unrighteous as they are, could be compensated in 
some degree by wholesome legislative penitence in the future. 
But all the penitence that a great nation can possibly show cannot 
replace one atom of the thousands of millions of tons of coal that 



18 THE WATER POWER PROBLEM 

have been ruthlessly burned while that nation, in the name of Con- 
servation, has placed its water poAvers beyond the reach of indi- 
vidual enterprise, where the thoughtful investor and the prudent 
guardian of trust funds must look upon them with suspicion or 
scorn. 

The electrical energy produced through the development of our 
water powers will find many markets, among Avhich are the fol- 
lowing : 

The Electric Furnace. — Marvelous new processes involving the 
use of the electric furnace have been perfected within the past 
few years. Over 1,200,000 horsepower has been developed in Nor- 
way, Sweden and other European countries for the fixation of at- 
mospheric nitrogen in the form of nitrate of lime, nitrate of soda 
and eyanamid, which products are used in the manufacture of fer- 
tilizers, explosives, cyanides and other needful products. There 
has been positively no development of the kind in this country 
because our great water powers caiiDot be financed under present 
laws. The United States imported during 1913 nitrogenous prod- 
ucts to the value of over $44,000,000. These Avere composed of 
Chilian nitrate of soda to the value of $23,000,000, the remainder 
of manufactured nitrogenous products coming from Germany and 
other countries. We haA^e long been dependent on Chili for the 
greater part of our nitrogen, and Ave have paid the price fixed by an 
absolute monopoly knoAvn as the "Nitrate Board." This is a Euro- 
pean organization. To manufacture nitrogen from the air in 
amount equivalent to that imported from Chili in 1913 would 
require 1,100,000 horsepoAver. To this extent then have Ave fostered 
the equiA^alent of a Avater poAver monopoly over Avhich Ave can have 
absolutely no control. It is estimated that the richer deposits of 
Chilian nitrate of soda will be exhausted Avithin twenty years and 
then the Avorld will have to depend upon the fixation of atmospheric 
nitrogen for its supply. Thus there is opportunity to build up a 




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THE PRACTICAL SIDE OF THE QUESTION 19 

great nitrogen industry in the United States which would require 
enormous quantities of electrical energy and which would free the 
United States from being dependent upon foreign countries for its 
supply of this tremendously important product. By failing to 
develop this industry, Ave not only inflict upon ourselves a depen- 
dent condition, but we contribute largely to the enrichment of 
foreign countries, which, in their wisdom, have fostered and 
encouraged the nitrogen industry. 

Nitrogen (saltpeter) is the basis of explosives and from the 
standpoint of National defense it is imperative that the product 
should be made within this country. The fact that nitrogen is not 
manufactured in the United States Avould prove of serious moment 
in case of war. In urging the necessity for building plants for 
the manufacture of nitrogen through the fixation of atmospheric 
nitrogen, military authorities have urged that the plants be so 
strategically located throughout the country as to be well protected 
against attack from foreign invasion from any quarter. Realizing 
this precarious situation, the War Department has for some years 
been trying to accumulate a reserve store of 65,000,000 pounds of 
Chilian nitrates. That is, the Department has been forced to buy 
from interests that may be hostile the very elements necessary for 
defense of our Nation. The Army and Navy use annually over 
6,000,000 pounds of this material in times of peace. Our ideas 
concerning the consumption of war munitions have been changed 
during the great crisis of the past year. We know that modern 
offense or defense is largely a matter of the efficient use of amounts 
of explosives undreamed of in wars past. In a prolonged Avar our 
store of 65,000,000 pounds of sodium nitrate would not go far. In 
a war such as is now raging in Europe this supply would probably 
last much less than one week. With a coast blockaded, we would 
find importations of nitrogen difficult or impossible. Our crops 
would have to be appropriated and our fields would have to be 



20 THE WATER POWER PROBLEM 

devastated to secure that needful element ; and all this at enormous 
cost, and delay to the Government. Water power development will 
solve this difficulty, but it should be remembered that the construc- 
tion and equipment of water powers and nitrogen plants require 1 
years. They must be ready for service at the onset of war. 

A quantity of phosphoric acid, greater even than that of nitro- 
gen, is used in the manufacture of fertilizers. Fortunately there 
are enormous deposits of phosphate rock, both in the Southern and 
Northwestern States. By an electric furnace process recently 
perfected, phosphoric acid may be produced through the treatment 
of phosphate rock cheaper than by ordinary methods. Here is an- 
other great use for hydro-electric power. 

The electric furnace is being more and more used in metallurgy. 
We in the United States are far behind Europe in this respect, but 
it is apparent that with the development of cheap hydro-electric 
power, great amounts of electricity will be used in the treatment of 
ores and in the manufacture of steel. 

Hydro-electric energy will be largely used for two great agricul- 
tural purposes — in the manufacture of electro fertilizers and in the 
operation of pumping plants to convey water to the higher arid 
lands of the West. In many cases, large areas of the richest lands 
lie above the reach of gravity water. In many other cases the 
conditions are such that irrigation with pumped water is cheaper 
and more practicable than irrigation by gravity water. Indeed, the 
cheaper gravity irrigation propositions of the West have been 
largely developed. The great irrigation development of the future 
will take place in those localities where the streams of the West 
not only furnish water for agricultural purposes, but also furnish 
the power with which to raise that water to the thirsty lands. 
There is also a great field in the use of hydro electric power for 
pumping underground waters to arid fields, which underground 
water would otherwise be unavailable for this purpose. 



THE PRACTICAL SIDE OF THE QUESTION 21 

Transportation. — The marvelous financial and operating success 
of railway electrification on the Butte, Anaconda and Pacific Kail- 
way in Montana furnishes a most powerful argument in favor 
of hydro-electric development and it shows that if by the adoption 
of a sound and sane water power policy, the electrification of rail- 
roads, especially in the West, can be accomplished, the transporta- 
tion benefits alone will be sufficient to warrant speedy legislative 
action to that end. This railroad, which is largely devoted to the 
transportation of copper ore, has about 90 miles of electrified track. 
Electrification has brought about a reduction of 75 per cent in oper- 
ating delays, an increase of 8.77 per cent in ton-miles hauled per 
annum, and a decrease in annual operating expenses of $268,728.12, 
or 36 per cent. This annual saving is equivalent to about 20 per 
cent of the total cost of railroad electrification. In the year 1913 
this road was operated under steam traction and the cost of coal 
alone was $315,235.74, while in 1914, under electric traction, the 
cost of delivered electric power was only $164,508.70, a decrease 
of 47.81 per cent. 

The Chicago, Milwaukee & St. Paul Railroad Company is now 
electrifying a 450-mile stretch of its transcontinental road between 
Harlowton, Montana, and Avery, Idaho. It has contracted to pay 
$550,000 per annum for delivered electric motive power, as against 
the present cost for coal over the same line, approximating $1,750,- 
000 per year. Under the new development, this coal will be 
saved and the water power, a product that has gone to 
waste from the beginning of time, will be utilized. It has been 
credibly stated that one-third of the freight equipment of this 
and other Western mountain roads is necessarily employed in 
hauling coal for the railway companies' use. Electrification will 
release this costly equipment for more useful purposes. The suc- 
cessful completion of the electrification of this 450 miles of line 
is sure to be followed bv similar electrification of hundreds of 



22 THE WATER POWER PROBLEM 

miles of the mountain divisions of other railroads of the West if 
suitable water power laws are enacted. It may be remarked that 
no part of the water power sites at the Great Falls of the Missouri 
and at Thompson's Falls on Clark's Fork, which will supply the 
Chicago, Milwaukee & St. Paul Railroad with power, are 
owned or in any way controlled by the Federal Government. If 
they had been these great developments in transportation could 
not have been financed and could not have taken place. 

The foregoing are merely a few examples which show that new 
uses and new markets are created for electrical energy, if only 
the tenures are permanent and safe, and the size and cheapness 
of development are such as to make reasonable profits possible at 
unusually low selling costs. Every practical man of wide experi- 
ence in this business knows that the permanency and safety of 
the investment mean more and cheaper development capital — 
and perhaps to most of us determines the ability to get the capital 
— and that in turn the cost of capital is by far the most important 
element in the water power business. 

Water power development in different parts of the country is 
already projected to the extent of more than a hundred million 
dollars. That development only awaits the passage of water 
power legislation by Congress under which capital may be safely 
provided for construction purposes. 

In New England, a great power on the Connecticut River would 
be utilized, adding largely to the navigable reaches of that stream 
and furnishing power for industrial purposes. Great water pow- 
ers in the Columbia Basin would be developed, making possible the 
navigation of those streams far into the interior and furnishing 
power for the manufacture of fertilizer, the operation of pumping 
plants for the raising of water to vast tracts of land, and for trans- 
portation and municipal purposes. Water powers now latent in 
the Tennessee, the Coosa and other Southern rivers and also those 







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THE PRACTICAL SIDE OF THE QUESTION 23 

in the upper reaches of the Mississippi River would be developed 
with similar beneficial results. In the mountain streams of the 
West there are enormous water power resources. Even in the 
more level States Avhere water powers have heretofore been given 
little consideration, investigations have shown that good opportu- 
nities exist. All of this being true, it is manifest that water poAver 
legislation cannot be considered a local or a sectional matter and 
it lies far above the realm of politics and the prejudices of men. 



WHAT ARE WE QUARRELING ABOUT? 



More than one man who has, with open mind, investigated this 
national water power controversy, has closed his review by asking, 
"What are they quarreling about?" Here is a controversy of 
about eight years' standing, which has prevented economic devel- 
opment in the United States to the extent of hundreds of millions 
of dollars. It has caused and is causing sectional discontent and 
suspicion where nothing but harmony and industrial co-operation 
should prevail. Some entire States feel that they are harshly and 
inconsiderately treated by the Federal Government — that they are 
being strangled by the hand of might. There is a widespread con- 
tention that the Western water power States are being denied the 
sovereignty to which they are entitled under the Federal Constitu- 
tion, and are having their growth impeded and are being impover- 
ished because ,such large proportions of the lands in such States 
are withdrawn by the Federal Government for water poAver pur- 
poses. Such lands are not subject to local taxation, although the 
communities and States are burdened with the maintenance of 
the law on those withdrawn lands. There is bitter complaint that 
although those lands were withdrawn from sale or entry under the 
pretext that they would thereby be rendered readily available for 
power purposes and thus their use for such purposes would be 
facilitated and encouraged, yet present laws make it impossible to 
use them — laws of fulsome promise but of deadly effect. 

Such are the consequences. Yet strangely enough the real 
differences between the contending parties are so small that it 
seems as if an hour's consideration by full-grown men ought to 
remove all cause of controversy. Therefore, is it not time that the 
leaders on both sides pause for a while and reason a little? Per- 



WHAT ARE WE QUARRELING ABOUT? 25 

haps it will be found that some are continuing the quarrel merely 
from force of habit. Well, then, what are we quarreling about? 

Merely for convenience, we will call one side "Theory" and the 
other side "Practice.'' The conference would run substantially 
as follows : 

Theory — "You water power people can't have any more 
perpetual permits to build and operate dams on navigable 
streams, nor can you have any more fee titles to public 
lands which involve water power sites." 

Practice — "All right; we gave up expecting such things 
long ago and have planned accordingly in our calculations 
for the future. We had supposed the policy was all set- 
tled; why do you keep on making speeches about it?" 

Theory — "Water powers must be developed under a per- 
mit or some form of term grant running, say, 50 years, 
after which the people must have the right to take over the 
property." 

Practice — "Are you going to pay us for the property 
when you take it over?" 

Theory — "Certainly, we shall pay the fair value." 

Practice — "Good scheme — we're all agreed." 

Theory — "But we are going to pay you only for the 
fair value of the property, and for no blue-sky stuff, like 
capitalized value of the permit and the Government lands 
occupied, goodwill, profits that you expect to get from 
contracts, nor anything that is not actually put into the 
property as a hard cash investment or its equivalent." 

Practice — "All right again — don't want to be paid for 
any blue-sky stuff." 
Theory — "And we want you to make prompt develop- 



26 THE WATER POWER PROBLEM 

ment of the properties under permit and not to hold them 
unused for speculative purposes." 

Practice — "Of course, we agree, and even if we didn't 
the fact Avould still remain that money is too scarce and 
too valuable to throw around and leave idle in such a man- 
ner, even for speculative purposes." 

Theory — "There shall be no artificial manipulation of 
things, nor any jockeying to the end that the consumers' 
rates shall be raised or that service be deficient or dis- 
criminatory." 

Practice — "No; such things should not be. Under mod- 
ern practice, the power business must be conducted on 
the large-volume and small-profit plan, Avhich necessitates 
low rates and equal service. But even if this were not 
so, public regulation through commissions now estab- 
lished in nearly every State of the Union will prevent high 
rates and discriminatory service." 

Theory — "Your consumers' rates should be as low as is 
commensurate with a reasonable return to the capital 
actually invested, irrespective of stock issued." 

Practice — "Certainly — just a reasonable return on the 
actual cash value of the property. The stock issued has 
nothing to do with the case, and is to be disregarded en- 
tirely, no matter whether it be represented by actual face 
value in the plant, or be watered to a million times that 
amount. This 'reasonable return on the fair value' idea, 
regardless of stocks or bonds, is universally an established 
principle in public utility regulation. A reasonable return 
has been well defined as the lowest return that will induce 
investors to purchase the securities of any particular in- 
vestment. A larger return is unreasonable, and a smaller 
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WHAT ARE WE QUARRELING ABOUT? 27 

only complaint that we have is that some of you 
people have selected public-land and navigable-stream 
power plants as subjects for strict regulation by the 
Federal Government, but you do not propose to exer- 
cise such regulation over plants that happen to be located 
on private lands. Regulation is a great and necessary in- 
stitution; it should be exercised indiscriminately and not 
concentrated on projects that happen to be located on sites 
either owned or controlled by the Federal Government. 
Private land plants and Government land plants should 
operate under exactly the same burdens and same laws." 

Theory — "For all Government property occupied or used 
you shall pay a fair rental or charge during all the years 
of the permit." 

Practice — "All right, suit yourself about that. So long- 
as you don't place your charges high enough to make it 
impossible to compete with gas or steam power, or with 
other water powers over which the Government has no 
jurisdiction, and so long as we know the amount of the 
charge clear through to the expiration of the grant, 
we are quite indifferent in the matter. You should 
bear in mind, however, that in the last analysis every 
burden placed upon a water power plant in public 
service which occupies a right of way over Government 
land is, and must necessarily be, passed on to and paid for 
by the consuming public. There is no other place for such 
money to come from. Every burden put upon such con- 
suming public, beyond the fair value (for all purposes) 
of the Government land so used constitutes merely an 
unjust charge by the National Government (not upon the 
public service company but upon the consuming public) in 
an amount which would not for a moment be countenanced 



28 THE WATER POWER PROBLEM 

by a jury or a court of equity if a private citizen owned the 
same land and was in court asking for adequate compensa- 
tion for the use of such land by the public." 

Theory — "You practical men talk as though you believe 
that we conservationists are trying to lock up all the water 
power sites and prevent their use. Don't you know that we 
realize as well as you do that the present enormous amount 
of water power going to waste is lost forever ; that 'the mill 
will never grind with the water that is past?' " 

Practice — "Well, it was you conservationists who stopped 
the wheels of progress in water power development. Why 
don't you start them again and stop the great waste from 
which the country is now suffering? Let development pro- 
ceed and incidentally save our non-replaceable fuel." 

Theory — "That is exactly what Ave have been trying to 
do, but you practical fellows are too fussy and critical con- 
cerning our Department rules and of the bills that we have 
had introduced into Congress." 

Practice — "Why should the investor not be afraid of 
placing his money under the absolute control of a Federal 
department when the laws now in effect do not alloAV the 
department heads to make water pOAver agreements Avhich 
will bind the Government or create property rights even 
though |1,000,000,000 may be invested in a plant. Have 
you forgotten the large number of permits that were arbi- 
trarily revoked notwithstanding the fact that the permit- 
tees had not Aiolated law or regulation? Have you over- 
looked the fact that a large number of consequent ejectment 
suits are now pending in the United States courts Avhich, if 
successful, will, in effect, confiscate about .$100,000,000 
worth of property, some of which Avas built many years 



WHAT ARE WE QUARRELING ABOUT? 29 

ago on the faith that Government permits were unques- 
tionably secure?" 

Theory — "Those revocations were and are great mistakes. 
We believe in government by law and not by individual dis- 
cretion. We believe that every dollar devoted to a public 
use, to serve the people with water poAver or anything else, 
should be protected by the strong arm of the Government — 
that the good faith of the Government should be pledged in 
the strongest language possible to protect all servants of 
the people who do their duty honestly and efficiently." 

Practice— "That is right, but your suggested laws do not 
accomplish this purpose; they are not practical; they 
shackle and impede your public servants so that it is im- 
possible to serve the people well, efficiently, or, perhaps, at 
all. Why do you continue to pile on harsh and burdensome 
requirements and uncertainties which do not apply in any 
respect to public servants on privately owned lands ; which 
add to the cost of money, which increase operating expenses 
and which prevent lower rates to the people? Don't you 
know that all this prevents development, injures the whole 
country and benefits no one?" 

Theory — "No ; such results are not desired nor intended. 
We are not advocating these things as a means of securing 
revenue for the Federal Government beyond a fair return 
on the reasonable value of its lands for all purposes. We 
want, however, to be sure that you water power men do not 
abuse the public nor extort unreasonable profits from the 
people." 

Practice — "That is entirely proper; but the things of 
which we complain have nothing whatever to do with deter- 
mining the reasonableness or unreasonableness of rates or 
the quality or conditions of the service. We are objecting 



30 THE WATER POWER PROBLEM 

to special burdens applying to power sites under Govern- 
ment control and not to all power sites alike ; to the things 
that benefit no one and yet either prevent development or 
increase the cost of service to the people. Why is not regu- 
lation and protection the only practical way to get the best 
service, to secure investment capital and to confine profits 
to a reasonable return on that capital?" 

Theory — "That is all right, but how do we know that reg- 
ulation will always be effective unless the departments in 
Washington can at all times keep a strangle hold on the 
public service corporations in the States and make them be 
good." 

Practice — "There you go again, back to government by 
the individual and at the discretion of an appointive Fed- 
eral officer — subjecting millions of the people's savings to 
the ever-changing personnel of a Federal office and to the 
individual preferences and whims of the Federal officer for 
the time being. That is exactly the present state of affairs ; 
that was exactly what resulted in the large number of per- 
mit revocations in the past and the subsequent ejectment 
suits. You know that capital is now shunning power 
developments where Federal authority is involved. A 
burned child dreads the fire." 

Theory — "We agree that regulation, if effective, will 
remedy all these things and will make it safe to enact a 
short law putting the power sites now under Government 
authority upon just as favorable a basis as those on private 
lands. We want the largest and best poAver development 
and we want it now. We are willing to put the public land 
developments on even a more favorable status than those 
on private land if this is necessary to accomplish the de- 



WHAT ARE AVE QUARRELING ABOUT ? 31 

velopment. But how can we be sure that regulation will 
be honest and effective?" 

Practice — "Practically every State now regulates its 
public servants and this will soon be universal. The people 
have the power to regulate and cannot divest themselves of 
that power. Who are most interested in the development 
of power and in the quality and conditions of the service 
and in the rates charged?" 

Theory — "The people who use the service and pay the 
bills, of course." 

Practice — "Certainly, it is the consuming public that has 
a direct personal interest at stake. If their public service 
commissioners do not do their duty, it is in the people's 
power to get new commissioners. If the local law regard- 
ing such matters is defective, the public can change it. 
Some of the proposed Federal laws on this subject have ap- 
parently been framed with the idea that it is wrong to 
secure the greatest possible development and the least pos- 
sible rates to the public. They have been framed with the 
idea of maintaining rates that will produce fancy profits 
and to divide those profits with the Federal Government. 
If this is not done, but, on the contrary, the consuming- 
public is allowed to regulate the rates that they pay, and if 
they are allowed to take all the benefits that arise from the 
securing of cheap money, large volume of business, inter- 
connection of power systems, etc., don't you think that 
human nature is such that the consuming public can be 
trusted to get for themselves every such benefit over and 
above such reasonable return as is necessary to get the in- 
vestment capital in any particular case?" 

Theory — "You are right. Besides, if any particular com- 
munity or State has large and cheap Avater power re- 



32 THE WATER POWER PROBLEM 

sources, it would not be fair to take away from that com- 
munity or State the inherent advantage given it as a birth- 
right by denying the fullest right to the lowest possible 
rates to its industries and people so as to secure for them 
all the benefits over and above a fair return on the invested 
capital.' 7 

Practice — "It has been proved over and over again that 
the lower and more stable the rates, the greater the indus- 
trial development in any particular community and the 
safer the capital — one thing helps another. This plan 
means more volume of business and more and cheaper 
money and more development. The Federal tax or the 
scheme whereby fancy profits are divided with the Federal 
Treasury means the reverse, and besides, it stunts the 
growth of those communities by robbing them of their nat- 
ural advantages." 

Theory — "But all the while your books and records 
must be open to inspection of the proper authorities, and 
there must be full publicity." 

Practice — "Yes, that is all a part of modern public 
utility regulation." 

It will be noted that "Practice" conceded, as it has done repeat- 
edly in the past few years, every correct principle put forth by 
"Theory." "Practice" has some points of its own to bring up, 
viz. : 

Practice — "You theorists seem to think that we Avant 
something for nothing; that we want lands and rights 
without charge, and, when they are taken over by the 
Government, that we want to be paid millions of dollars 
for them. Do you think that, in view of our previous an- 



WHAT ARE WE QUARRELING ABOUT? 33 

swers to your questions, you are justified in your public 
charges that we are robbers and oppressors of the public ?" 

Theory — "It is quite apparent that if you will make 
good on all you haye said, the charges made against you 
are undeserved." 

Practice — "You folks think we ought to make a little 
money on our investments?" 

Theory — "Oh, yes; liberal earnings — as much as 12 per 
cent in some cases to compensate for your great risks." 

Practice — "You think that legislation should be so 
framed that we can safely provide money at low rates of 
interest ; that we should have an assured title in the prop- 
erty, irrevocable except for breach of contract; that we 
should, so long as we serve the public faithfully and well, 
be free from harassment and needless abuse, and all 
attendant dangers and menaces to our securities — 
in short, that we should be able to live normally on a 
stable basis, and have our securities accepted as standard 
investments?" 

Theory — "Yes, you should have the benefit of all of those 
things." 

Practice — "Now, do you think we can have and hold all 
those comforting assurances if you pass a law under which 
the rules of the game may be changed after we have put 
our money on the table? Do you think we can secure 
money cheaply or sustain the value of our securities if the 
law that you pass leaves the safety of our property without 
even the right of appeal, subject to the varying views of 
successive Federal officers, or hides the future from us, or 
makes us guess as to what will be the order of the day or 
the rules of the game 20, 30, or 40 years hence? Do you 



34 THE WATER POWER PROBLEM 

think that uncertainty and financial stability can dwell in 
accord?" 

Theory — "No; judging from the principles of old-fash- 
ioned business under which one honest man always has 
and always must deal with another man, it appears only 
logical and reasonable that your water power law must be 
uniform in its application, definite and sure in its terms 
and give you a clear look through to the end." 

Thus, theory and practice are entirely in accord, as is always 
the case when practice is honest and theory is correct. 



-a bc^ o a S 
<z>^ (u a & v 




WHO PAYS FOR UNFAIR AND 
RESTRICTIVE LEGISLATION? 



The foregoing imaginary conference covers all of the fundamen- 
tal things involved in the legislative features of this water power 
question, and concerning them there is, and there can be, no dis- 
pute among considerate persons. When, however, we come to the 
drawing of a legislative measure, it seems that we are almost cer- 
tain to break away from this understanding. Small details and 
uncertain or indefinite expressions creep in or are, in ignorance 
and without malicious intent, placed in to defeat the very real ob- 
jects that all parties seek to attain. Who pays? No one but the 
consuming public. Well-meaning speakers and writers blessed 
with patriotic regard for the public welfare have thoughtlessly 
advocated many things the effect of which would be to impede the 
progress of the water power developer, restrict his operations or 
prevent his exercising skill, enterprise or other goodly quality in 
the interest of his business. It will not be practicable to enumer- 
ate and discuss all such instances here but every one familiar with 
this subject will recall one or more. Those who propose such 
things do not need to take the word of anyone ; let them get right 
down to fundamentals, use some good old-fashioned arithmetic, 
and they may prove to their own satisfaction that the consuming 
public pays and pays right well. To illustrate this point, we may 
select one of several unwise provisions of the so-called "Ferris 
Water Power Bill' 7 as passed by the House of Representatives in 
the Sixty-third Congress. 

The provision here selected, which was subsequently changed in 
Senate Committee, occurs in Section 5 of the House bill and pro- 
vides that the Government, upon taking over the property at the 



36 THE WATER POWER PROBLEM 

expiration of any lease period, shall pay, "first, the actual costs of 
rights of way, water rights, lands and interests therein purchased 
by the lessee * * * and, second, the reasonable value of all 
other property taken over, including structures and fixtures ac- 
quired, erected or placed on the lands * * *." Reduced to 
simplest terms, these expressions mean that no lessee would be 
allowed to benefit from any increase in land values that might 
take place, or, in other words, the owners of the power plant could 
not partake of any of the prosperity which they, by their invest- 
ment, had created or initiated. On the other hand, the power 
plant will be penalized under the term "reasonable value" for 
all obsolescence and depreciation on structures and equipment, 
i. e., the owners would receive, on taking over of the plant, a price 
considerably less than the cost of the structures and equipment. 
Thus, the Government says, "Heads, I win ; tails, you lose." It was 
argued by the well-meaning gentlemen who were responsible for 
this clause, that the people would thereby be saved large sums of 
money. A little arithmetic will demonstrate that it would have 
quite the opposite effect. 

Assume a water power site of 10,000 horsepower capacity, which 
occupies land valued, for power purposes, at f 100,000. One-half 
of this land, owned by the United States, is acquired under lease, 
as proposed by the "Ferris Bill;" the other half is owned in fee 
by private parties and is purchased by the lessee for the sum of 
|50,000. Under the above plan, the land, when taken over, 
would cost the public only $50,000. Let us go beyond the point at 
which the advocates of this measure stopped. The power plant, 
with all its appurtenances, including transmission and distribu- 
tion systems, would normally be worth, say f 3,000,000. How much 
is it actually worth as an investment risk under the abnormal 
condition created by the proposed law, in which it cannot partake 
of the normal prosperity of the region as reflected by land values? 



WHO PAYS FOR UNFAIR LEGISLATION? 37 

Obviously, the plant istarts out with a handicap. It cannot stand 
in competition with other investment risks in the region. Lands 
in the vicinity, occupied by dwellings, stores, industrial plants, 
railroads, etc., can all appreciate in value along with the country's 
prosperity. Not so Avith the power plant. It is doomed at the 
outset to curtailment. The penalties of depreciation are certain 
while the usual rewards of appreciation are denied. Of course, 
the plant can never be worth all it coists to build and maintain 
it. What is the result? 

No one is going to be foolish enough to buy the bonds of that 
power plant at as large a price as could be demanded if the plant 
were not tied up with an anti-appreciation stipulation. Moreover, 
more interest will surely be demanded on a bond covering a plant 
of this kind than in the case of a security underlying any other 
proposition that could hold up its head in a competitive bond 
market. Remember that all of these industries compete with one 
another for money, and the one that shows the weakest case is the 
one which pays most for its money, unless, indeed, it is so weak 
that it can't get money at any price. The bonds of a non-appre- 
ciating and surely depreciating plant on Government land 
would be discounted in excess of 5 per cent more than 
they would if on private land, and pay at least 1 per 
cent additional interest during their life. A $3,000,000 plant 
bonded to 80 per cent of its value would issue securities aggregat- 
ing f 2,400,000. Five per cent discount on that sum would amount 
to $120,000. One per cent interest would be $24,000 annually. 
Throughout the period of bonded indebtedness, this extra interest 
would be paid and the land in question, originally valued at 
$50,000, would eventually cost at least $1,000,000. Who would 
pay for this? No one but the consuming public. All of these 
extra costs are the just and legal obligations forced upon the 
power plant. The power plant, on the other hand, derives its en- 



38 THE WATER POWER PROBLEM 

tire income from the public and in fixing a just consumers' rate, a 
public service commission would have to alloAV for all of these 
extra costs due to increased risks. The public Avould find it all in 
their monthly bills. So it is that the great and beneficent purpose 
of saving the public the cost of appreciation on land worth $50,000 
fails when tested by the ordinary rules and laws of credit, of in- 
vestment and of common sense. 

The procedure and the equities in a real estate transaction 
are familiar. Suppose, for example, that a man buys a lot of 
land in a new and rapidly growing town that has been located 
around a water power development or is created by industries 
that spring up within the area of power transmission as the result 
of a hydro-electric development. It is known that the usual and 
proper course of procedure is for the purchaser of that lot of land 
to erect a building thereon, say for mercantile purposes. He does 
not anticipate appreciation in value of the structure. On the 
contrary, he knows that the structure Avill depreciate and its value 
will become constantly less. His productive investment is in the 
land and there comes a time in the growth of the municipality 
when he can afford to disregard any value in the building because 
he secures a reasonable profit in the increased value of the land. 
Suppose, further, that with the growth of the municipality, Con- 
gress decides that it has become advisable to erect a Postoffice 
building and selects this property as the best and most advantage- 
ous. No question would ever arise concerning the propriety of 
paying to the owner of the property a price that would represent 
the original cash price he paid for the land, plus the 
appreciated value. Such a proceeding would be equitable 
and the owner would be awarded that reasonable appreciation 
under condemnation proceedings. Noav, during all the time 
in which that property was in private ownership, the owner 
thereof would be serving his own interest exclusively. There 



WHO PAYS FOR UNFAIR LEGISLATION ? 39 

would be no regulation of the amount of rental that he 
could charge tenants for the use of that property and he 
could discriminate and extort to his heart's content so long- 
as he found a willing subject. The water power developer, on the 
other hand, Avhose hydro-electric property might perhaps be 
located on the next block, would be always subject to sovereign 
control ; his profits would be regulated, his accounts made public 
and those with whom he conducted his business would be pro- 
tected from discrimination and extortion. Purely real estate 
transactions of the kind above described are considered thor- 
oughly honorable and legitimate. Are honorable water power 
transactions less honorable than real estate transactions? The 
fact that the water power operator is in public service is admit- 
tedly a justification for the sovereign control of his business in the 
public interest, while the nature of the real estate operator's busi- 
ness clearly exempts that business from such regulation. Never- 
theless, this difference in public relation does not justify the as- 
sumption that the fundamental laws governing property values 
are changed in any way or that justice and equity should not be 
applied uniformly. That which the real estate operator would 
lose on his building would be compensated by the appreciation on 
his land, and unless this principle be applied to all real estate 
transactions, there can be no stability of investment in real estate. 
If the Government must, in equity and justice, pay the appreciated 
value for the Postoffice site, it follows that that same equity and 
justice would demand that the Government pay for appreciated 
value in the lands acquired by purchase for a water power site. 
This does not refer in any way to the recaptured Government 
land for which nothing was paid, and for which nothing is asked, 
but it refers only to private land purchased for cash. How much 
pioneering would there have been in building our Western cities 
if it had been provided by law that someone could come in and 

(5) 



40 THE WATER POWER PROBLEM 

take over our homes, stores, or office buildings, at their depre- 
ciated values, and yet allow nothing to the pioneer for apprecia- 
tion of the land on which the structures are built? Again, let us 
consider the property as a whole. There can be no possible 
enhancement in the elements of value common to a private enter- 
prise because every possibility of obtaining more than a reason- 
able return upon the actual investment devoted to a public use is 
barred through regulation. The water power owner can claim 
nothing for the loss of anticipated profits from pending contracts, 
good will and many other items of speculative value which are 
and must be considered when the Government is taking over the 
business and property of a private owner. 

The case above discussed is similar to many others which could 
be picked out of the original Ferris Water Power Bill. We may 
be certain that whenever a patriotic gentleman arises, in the pub- 
lic interest, to place burdens on a water power development, he is 
actually not placing the burden on the development company but 
upon the people in whose interest he is supposed to act. 

In private homes, the master furnishes the money to maintain 
the household, and anything that makes it more expensive or more 
dangerous for a servant to perform his duties is first of all a tax 
on the master. In the public service power business, the people 
are the sovereign and master, and the public service company is the 
servant. The capital of investors is here being hired to serve the 
sovereign people. The people must pay the bill and be fair, else 
the servant will be unable to obtain the money upon reasonable 
terms, necessary for the service of the master. What master of 
the house can expect efficient and faithful service, or any service 
at all, if he starves or maltreats his servants? Does not the same 
rule apply to the hiring of money and practical men of experience 
in the public service power business? 










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THE WATER POWER BUSINESS AND 

ITS RISKS 



One should remember the peculiarities and risks of the w T ater 
power business in this country, in the making of laws relating 
thereto. A law that might well serve the needs of mercantile or 
manufacturing business would utterly fail if applied to the water 
power business. Why? 

No business requires so much capital investment per dollar of 
gross annual receipts as the water power business. The pros- 
perous merchant will, in a year's operations, take in four, five and 
sometimes six times as much money as is represented by his 
capital investment, or, in other Avords, the merchant's capital in- 
vestment is only 25 per cent, 20 per cent or 16 per cent of his an- 
nual gross receipts. In the case of manufactures, the Thirteenth 
Census Report shows that on a total investment in the United 
States of |18,490,749,000, the value of manufactured products in 
1909 was $20,767,546,000. Therefore, the manufacturers of the 
country "turned their capital over" a little more than once during 
that year. In the hydro-electric business, however, it requires on 
an average of from six to seven years' gross earnings to equal capi- 
tal investment. All of this means that in order to earn a dollar 
gross, the water power investor must tie up from 24 to 36 times 
as much capital as the merchant, and six times as much as the 
manufacturer. Therefore, the greatest items to be considered are 
(1) the cost of the large amount of money required and (2) the 
fact that under the best and most liberal of conditions, the water 
power investment risk must be large. A bad title or a burdensome 
Governmental restriction might be a fairly safe financial risk in a 



42 THE WATER POWER PROBLEM 

mercantile business and at the same time be quite fatal in the 
water power business. 

We always seek to place an office building, mill or factory in 
a safe locality. A water power plant must, on the contrary, always 
be located in a hazardous place. If it were not so put, it could not 
be a water power plant. One of the first requisites of a high-power 
transmission line is that it shall stand out free and aloof from 
every other thing — in other words, that it shall be exposed to all 
severe storm conditions. When the war broke out in Europe, Con- 
gress very properly hastened to provide for "War Kisk Insurance." 
A power plant and its transmission lines are perpetually at war, 
with persistent and relentless forces of nature. Shall the water 
power investor be denied war risk insurance? Let him have it in 
the shape of reasonable dividends, good title and a contract from 
Government, which as to business equity, mutuality and certainty 
will conform to straightforward, honest business precepts. 

Stores and factories can be started on a modest scale and in- 
creased according to the growth of business. This is not so with a 
water power plant. About 90 per cent of the ultimate expenditure 
must usually be made at the outset and the "dead capital" must be 
carried through long years of lean business. The first customers 
cannot pay rates for power that will reimburse the owners for 
their whole investment. Their rates must be the same as though 
the power plant were disposing of its maximum output. So, the 
above mentioned items representing war risk insurance must here 
be included under "lean year insurance." 

Water power is useless without market and market is full of 
whims. Mills, factories and mines close down or reduce output 
in times of poor business, and this results in reduced power con- 
sumption; railroads operated by hydro-electric power carry 
lighter loads. The householder, in times of business depression, 
uses fewer lights, and is more careful about turning them out 



THE WATER POWER BUSINESS AND ITS RISKS 43 

when they are not actually required. Even the heavens sometimes 
intervene; the hydro-electric systems of the West which operate 
pumps for irrigation duty find their revenues enormously reduced 
if the fields are blessed with a season of abundant rains. In such 
cases the farmers do not need power for irrigation purposes — an 
advantage to the farmer, but none the less disturbing in the diffi- 
cult financial operation of a power system. There are whims with- 
out number and each and all demonstrate the need for "market in- 
surance." 

Thus the power business requires generous consideration at the 
hands of Government. It should not be inferred from this state- 
ment that the author advocates license of corporate abuse or relax- 
ation in any degree of public control. Neither does he seek to con- 
done any unlawful or unrighteous practice. The point is that as 
all these risks are natural and inevitable, and as the water power 
business must always be beset with more financial hazards than 
any other conservative business, the Government must, if it would 
encourage investment therein, extend to capital a definite and 
plain contract or franchise, leaving no loophole through which 
the public interest may be abused and relaxing in no respect the 
sovereign power of the people, but at the same time putting no 
burdens on the development on public lands or on navigable 
streams that are not also borne by developments that are not sub- 
ject to Federal jurisdiction. The investment banker who disposes 
of securities to his clients is and must be as mindful of those 
clients' interests as are physicians or lawyers with respect to the 
interests of their clients. The investment banker's reputation is 
as dear to him as is the reputation of any other practitioner to 
himself. He must look beyond the face of a paper offered as 
security for a loan. He must be satisfied that the maker of that 
security is able to sustain the obligations entered upon. He notes 
the water power hazards above discussed and he rightfully de- 



44 THE WATER POWER PROBLEM 

mands that if his clients must sustain those hazards they must, on 
the other hand, have a good title, a fair chance for an assured re- 
turn of principal and reasonable interest and that the terms and 
conditions written into the franchise shall be definite and without 
unnecessary financial peril — that the occupation of the land is a 
matter of right and not of grace. 




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WATER POWER OWNERSHIP AND 
CONTROL 



The author has in years past been interested by the startling 
statements made in the press, from the platform, and in legislative 
halls, concerning a "country-wide water power monopoly." Dur- 
ing the past two years he has diligently sought for such a monop- 
oly and has found that such a condition can not occur in the 
"country wide" hydro-electric field. In the first place it is absurd 
to think of competition or restraint of trade between a hydro- 
electric field in New York and another in Montana. There can 
be no commodity control as between the two places because the 
use of the power or service generated in one field is relatively local 
in that field. In the second place, the public controls in all cases, 
either by direct supervision through Public Service Commissions 
or through the terms of public charter which can always be re- 
voked on violation. 

Considering now the local field of distribution alone, the water 
power business is a natural monopoly and can, in the public inter- 
est, be nothing else. In this respect, water powder is in no wise 
different from our Post Office Department, our city water sup- 
plies or sewerage systems. Can one imagine two competing sewer- 
age systems in a community? The absurdity is no greater than 
competing water power systems. On this point one can do no bet- 
ter than to quote from authorities. 

From the report of the National Waterways Commission (S. 
Doc. No. 469, 62d Cong., 2d Sess.) : 

"The important fact to be gathered from the entire discussion of 
this phase of the subject would seem to be not so much that financiers 
and promoters might find it to their advantage to promote a monopoly 



46 THE WATER POWER PROBLEM 

as that the economical considerations and the natural character of 
the business make monopoly almost inevitable, and perhaps desirable, 
when subject to strict public regulation." 

From the testimony of Hon. Walter L. Fisher, then Secretary of 
the Interior, before the National Waterways Commission, Novem- 
ber 23, 1911 : 

"I think hydro-electric development is essentially monopolistic and 
should be essentially monopolistic in its character. That is why I 
think it should be effectively regulated. I think they should have the 
advantage of the control of the market and the freedom from harass- 
ing and vexatious competition if we are going to put them under the 
disadvantages of effective public regulation." 

From the testimony of Mr. Gifford Pinchot, before the National 
Waterways Commission, November 23, 1911 : 

"I am very strongly in favor of the consolidation of water power 
plants, coupling them up over large areas * * *. Better service 
to the community would be forthcoming if water power companies 
operated over large areas. But there must be public control of their 
operations to prevent the benefits which would come by reason of 
such consolidation from being translated into a general overcharge 
to the consumer." 

By Hon. B. H. Meyer, member of the Interstate Commerce Com- 
mission (the American Political Science Review for August, 1911, 
p. 374) : 

"There are few things which the industrial history of advanced 
nations proves more conclusively than that competition in the field 
of public utilities has failed to insure reasonably adequate service at 
reasonable rates. The public has had occasion to learn this lesson 
many times on a large scale * * * Certainly we have had enough 
repetition of disasters to the public as well as to investors to lift 
this subject out of the field of controversy; but somehow these lessons 
have not been on a sufficiently large and overwhelming scale, for 
the fetish of competition is still being worshipped, and the cry of 
competition is still raised by many as the touchstone capable of 
dissolving every obscure entanglement which the strained relations 
between the utilities and the public sometimes create. 



OWNERSHIP AND CONTROL 47 

"The Wisconsin public utilities law is a repudiation of the fallacy 
of competition as a guarantor of good service at reasonable rates and 
is planted squarely upon the ideas of monopoly in the utility business 
except in the case of telephones. Give a utility plant a definite field 
and compel it to do its proper work reasonably well within that field; 
this is one of the basal ideas in the law." 

And finally, President Wilson in an address before the students 
of the University of California in 1911, said : 

"Public service corporations are, in a very interesting sense, natural 
monopolies * * *. It is perfectly obvious that if other companies 
are allowed to compete with them there is a wasteful duplication in 
outlay and equipment, so that competition generally results in the 
eventual combination of the competing companies and the necessity 
to charge a price on what they supply that will pay the interest on 
twice as great an investment as was really necessary for the service." 



WATER POWER LEGISLATION 



The Sixty-third Congress gave much consideration to water 
power, yet, because of divers conditions and complications, failed 
to enact any law. Two bills had passed the House and were on the 
Senate Calendar when the Congress closed. H. R. 16053, known 
as the "Adamson- Shields Bill," covered water power development 
on the navigable rivers. H. R. 16673, known as the "Ferris Bill," 
related to power sites on the Public Lands. These bills differed 
materially because they related to entirely different situations. It 
will not be practicable to discuss these bills in detail nor to set 
forth all their merits and demerits. It will, however, be helpful to 
review certain parts of them because they will illustrate most con- 
cisely the important features of the discussion. For convenience, 
copies of these two bills are placed in the Appendix. 

Navigable Stream Legislation. — As amended and passed by the 
House of Representatives, the Adamson Bill was a mere waste of 
time and paper. In many respects it promised to the investor far 
less security and much more burdensome restrictions than the 
present General Dam Act of 1910, under which water power de- 
velopment has become practically stagnant. For an extended dis- 
cussion of the defects of the Bill the reader is referred to Senate 
Document No. 570, Sixty-third Congress, Second Session, entitled 
"Development of Water Power; Comments Relative to H. R. 
16053." The Commerce Committee of the Senate, to whom the 
House Bill was referred, made material changes and, while retain- 
ing many of the fundamental principles upon which the Adamson 
Bill was based, partially eliminated the unworkable portions and 
added many new beneficial features. The "Adamson-Shields Bill," 
as finally reported, had the unanimous approval of the Committee. 



WATER POWER LEGISLATION 49 

The "Adamson-Shields Bill" gives the Secretary of War author- 
ity to approve the construction of dams and water power plants 
in the navigable streams, upon the grantee's compliance with the 
terms of the Act and the Departmental rules and regulations there- 
under. The specific terms may briefly be recited as follows: 

1. The grantee must possess suitable qualifications under laws 
of the State in which the structure is to be erected, must promptly 
start and diligently perform the work within specified periods. 

2. The grantee's right to occupy the site extends for 50 years, 
and until the United States takes over the property upon payment 
of the fair value thereof, which fair value shall not include any 
value of the right or franchise granted by the Government. Thus 
the Government has the option at the end of the 50-year period 
to (a) operate the property, (b) renew the grant to the original 
grantee on mutually satisfactory terms, or (c) convey the prop- 
erty to a new grantee. 

3. The grantee is required to pay the United States: (a) for 
the cost of investigation and supervision of construction by the 
Department; (b) for benefits derived from headwater improve- 
ments of every kind made at Government expense; (c) for all 
lands of the United States occupied by the grantee, the charge to 
be in the form of annual tax or rental determined by the Secretary. 
All other taxes are left to the States and municipalities involved. 

4. All plans must receive the approval of the Secretary of War, 
and he is directed to approve only those which are best adapted to 
expedite and utilize the water resources of the region in the most 
useful Avay. The plant must be operated under the direction and 
control of the Secretary of War, with due regard for the interests 
of navigation. As a condition of approval, the Secretary may, at 
the time of approval, require the grantee to construct locks and 
other navigation facilities, all of which become a part of compensa- 
tion to Government for the rights enjoyed. 

(6) 



50 THE WATER POWER PROBLEM 

5. In case of dams built by the Government, the Secretary of 
War is given authority to lease the surplus power on such terms 
as may be for the best interests of the United States. 

6. The bill provides for reserving the right to regulate rates 
and service in the case of interstate business ; for reasonable rates 
and efficient service under all conditions; for full regulation by 
Secretary of War within States which have provided no regu- 
latory functions. 

7. Complete penal section is provided under which every neces- 
sary executive and judicial act may be taken to secure full and 
complete compliance with all laws and regulations. 

Power developments on navigable streams by private capital 
would improve navigation and render the streams navigable for 
further distances into the interior of the country. This would 
not only benefit the Avhole public through increased transportation 
facilities, but Avould relieve the Government of the cost of making 
navigation improvements at the expense of the Treasury 

Public Lands Water Power Legislation. — The water powers of 
the public lands of the West were much debated during the Sixty- 
third Congress. In May and in December, 1914, hearings on the 
so-called "Ferris Bill," H. R. 16673, were held by the Public 
Lands Committees of the House of Representatives and the Sen J 
ate, respectively. There appeared at the time to be much diversity 
of opinion, though close analysis shows that all were contending 
for the same fundamental things. One side comprised those who, 
as public-spirited citizens, had studied the question in an academic 
way and desired legislation that would protect the public interest. 
They frankly confessed that they had no practical experience in 
the water power business either from the investment, the operative 
or the construction standpoints. The other side Avas represented 
by practical water power men who had given long years to the 
construction and operation of hydro-electric systems; also by 



WATER POWER LEGISLATION 51 

financiers, bankers and investors who were well informed from 
practical experience on that phase of the water power question. 
Thus there were the doctrinaires on the one iside and the practi- 
tioners on the other. What was the trend of their testimony? 

The practitioners were in thorough agreement with the doc- 
trinaires as to the regulation of water power practices and the 
protection of the public interest. They disagreed only upon one 
general point, viz. : the practitioners insisted that the public in- 
terest could be protected without making water power investment 
impossible or a speculative thing at best ; that the legislation upon 
which the doctrinaires insisted would result in the immediate de- 
preciation of every dollar expended in water power development. 
So far as the author is able to learn, not a single engineer of prac- 
tical experience, nor an operator, nor a financier appeared in favor 
of the so-called Ferris Bill as it was introduced into the House of 
Representatives, favorably reported by House Committee and 
passed. Can it be possible that all of those experienced men were 
mistaken, or can it be believed that they all deliberately falsified? 
The author thinks not. In every walk of life we are guided by the 
weight of experience. Can there be any doubt that the practical 
men who testified concerning practical things were better qualified 
for such testimony than were the doctrinaires? One who sits in 
impartial judgment and who duly regards the weight of evidence 
in this matter is bound to arrive at one of two conclusions; either 
the practical men were right, or the practical men deliberately 
attempted to deceive Congress. Does anyone seriously believe in 
the second conclusion? Please remember in answering this ques- 
tion that the points at issue were not those of mere policy, nor did 
they involve any theorizing on prospective events. All were 
in agreement as to the results to be accomplished in the public 
interest. In all the public testimony and expressions of opinion 
that I have seen, the doctrinaires have, without exception, been 



52 THE WATER POWER PROBLEM 

liberal in their views as to the return which they believed the water 
power investor justly entitled to receive. There were no differ- 
ences whatever as to what the final result ought to be with respect 
to all parties concerned. The only differences were as to the 
language in the bill necessary to accomplish the purpose upon 
which all were in agreement. These differences involved plain 
matters of business security, the principles underlying which 
were settled centuries ago. All will admit that the doctrinaires 
were sincere and their motives patriotic, but when we come to 
a choice between experience and inexperience it seems certain that 
the world will finally be governed by the findings of experience. 

The "Ferris Bill" as passed by the House of Representatives, 
was built up on the assumption that Federal ownership of land, 
necessary to water power development, carries with it the owner- 
ship or at least the right to control the use of the water and the 
right to impose a Federal tax and any other conditions, without 
limit, on the poAver developed by the water. The ownership and 
regulation of water in the West has, by State constitution, State 
statute and common consent, for many years been regarded as 
vested in the several States. In the Western States the doctrine 
of the appropriation of water for actual beneficial use prevails, 
as against the Eastern riparian doctrine that the abutting prop- 
erty owner can require the water to flow — and waste — as it 
is wont to flow, as against the claim of someone who desires to 
put the water to beneficial use. The appropriation doctrine of the 
arid States is the child of necessity, where water is as precious 
as the air and where practically every use of water is both a public 
and beneficial use. Under the "Ferris Bill," Federal owner- 
ship of even a minute portion of the land necessary for power 
development would mean Federal control which would cover or 
markedly influence the taxation of all of the remainder of the 
property used in the power site, whether its ownership be State or 




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WATER POWER LEGISLATION 53 

private. Almost every feature controlling the integrity of the in- 
vestment and the stability of public service, including the raising 
of Federal revenue, was, according to this bill, to be fixed by the 
discretion of an appointive official — the Secretary of the Interior — 
who has no sovereign powers, whose opinions do not commit the 
Government, nor does the opinion of any particular occupant of 
that office commit his successors therein. One of the confessed 
objects of the bill was to make it possible for the Secretary of the 
Interior to impose discriminatory rentals or taxes in accordance 
with his judgment, or his preferences in any particular 
case, all of which is diametrically opposed to the funda- 
mental American doctrine of equality before the law. Because of 
the financial uncertainties imposed, every investment made under 
the House bill would be highly speculative and no water powers 
could be developed except at great risk and under conditions which 
will permanently put great and wholly unnecessary burdens upon 
the people and throttle the growth of the Western States. 

As the bill was reported out of Committee in the Senate, it re- 
tained, though to a modified extent, the fundamental assumption 
in the House bill that Federal ownership of land may properly 
become a pretext for the control of the use of water owned by the 
State. Much of the absolute discretionary power conferred upon 
the Secretary of the Interior by the House bill was removed by the 
Senate Committee and the equivalent stipulations were either 
fixed in the bill or left to the sovereign discretion of the States. 
As a whole, the Senate bill is remarkably improved — so much im- 
proved, in fact, that its few fatal defects seem all the more regret- 
table. Among them are the following : 

1. The last proviso of Section 1 requires that no lease shall be 
granted until the applicant has secured the water right from the 
State wherein the project is to be located. In many, if not all of 
the States of the West, water rights cannot be perfected until bene- 



54 THE WATER POWER PROBLEM 

ficial use has been made of the water. Therefore, the power devel- 
oper would be in the peculiar position of being unable to secure a 
Federal lease until he had procured a State water right, and, on 
the other hand, of being unable to secure the State water right 
until he had acquired and developed under the Federal lease. This 
difficulty would be well met by providing that the applicant must, 
previous to securing the Federal lease, have initiated water rights 
under the laws of the State. 

2. Section 3 provides that authority for the regulation of rates 
and service and the supervision of the issuance of stock and bonds 
shall, in interstate cases, be vested in the Interstate Commerce 
Commission. Some legal objections have been made to this, the 
soundness of Avhich the author is not qualified to discuss. The 
practical objection is that interstate regulation of electric service 
and the financing should not be confined merely to those water 
power plants which occupy public domain in whole or in part. Tf 
the time has come for the Federal Government to regulate this in- 
dustry, then it is obvious that such regulation should be applied 
upon identical terms to all interstate service, whether the plants 
occupy public or private lands, or whether the electric power be 
generated by water, by steam, by gas or in any other manner. Any 
other procedure unjustly discriminates against and renders vastly 
more difficult the development of water powers on Government 
lands as compared with those on private lands. Why should the 
occupant of a right of way over Federal land be subjected to class 
legislation? Why should the amenability of a power developer 
to the law, and the consequent jurisdiction of the Courts over his 
business, depend upon whether his pipe line goes over or around 
a few. feet of Government land? Is it better for Congress to settle 
all these matters by general laws, or that every individual shall 
be left free in this bill to vary his pipe location and thus settle 
these questions as he may elect? 



WATER POWER LEGISLATION 55 

3. Section 6 contains a provision the real purport of Avhich 
was probably not intended by the reporting committee. In any 
event, the provision directly violates the standards which the com- 
mittee has established in other parts of the bill, viz. ; that the in- 
vestor shall have definite and well-defined security. The section 
provides that if at the end of the 50-year lease period, the United 
States does not exercise its right to take over the properties, and 
does not renew the lease to the original lessee, nor issue a lease 
to a new party, who, on receipt thereof shall reimburse the original 
lessee for the fair value of his property, the said original lessee 
may, "at his option," retain the lease on such terms and conditions 
as may be in force at the time of lease expiration. What is this 
option? It is (a) to accept the lease on such new terms as may 
then be in force or (b) abandon the property. This is precisely 
equivalent to saying to a drowning man "sink or swim." Remem- 
ber that in the premises set forth, the United States fails or re- 
fuses to take over the property, fails or refuses to renew the 
lease to the original lessee and fails or refuses to lease to a third 
party Avho will pay for the property. Then comes the 
option, "sink or swim," or, in other words, "take what I 
give you or abandon your property." Please apply this principle 
to a lease of ground for the erection of a twenty-story 
building, in which lease it is stipulated that the lessee shall 
spend $1,000,000 for the building, and at the expiration of the 
lease will (a) be reimbursed for the then fair value of such im- 
provements, or (b) receive a renewal of the lease, or (c) — here 
comes the "sink or swim" provision — will be given a new lease 
upon such terms as the lessor may at that time be granting gen- 
erally to other lessees. Evidently, such a lease would give no se- 
curity to large invested capital. This should be remedied by pro- 
viding that if the Government does not exercise its right to take 
over or to renew the lease at the end of the lease period, the orig- 



56 THE WATER POWER PROBLEM 

inal lease shall continue until the Government does exercise this 
right. 

4. The proviso in Section 7 excludes "going concern" as one of 
the elements of value which cannot be taken into consideration 
when the property is taken over by the Government. Justice of 
such an exclusion all depends on the framers' meaning of the term 
"going concern." The Supreme Court decided in the Omaha case 
(218 U. S., 180) that, properly interpreted, the term is applied to 
the product of legitimate cash expenditure. Therefore, the exclu- 
sion of "going concern" means confiscation of a portion of the 
property and under such conditions no prudent investor will buy 
the securities. Whatever may be the principal significance of this 
or any other term, it is manifest that the Courts have uniformly 
excluded claims for values not actually represented in the property 
taken over. Therefore, it is both needless and dangerous to ex- 
clude off-hand a set of values which are likely to be thoroughly 
legitimate. 

5. Section 7 of the bill provides that no lessee may execute con- 
tracts for the sale and delivery of electrical energy for periods ex- 
tending in excess of twenty-five years beyond the 50-year period 
of the lease. This gives a margin of 75 years for a contract if the 
same is made at the beginning of the lease term, which would prob- 
ably be sufficient except for very large and expensive industrial 
works, such as electro-chemical and electro-metallurgical plants; 
also for railroad electrification and large irrigation systems, both 
of which must have power for all time. All of these would be 
practically excluded, or at any rate greatly deterred by the provi- 
sion here discussed. Another serious consideration lies in the fact 
that at the end of, say, 40 years of the lease period, the lessee would, 
under no circumstances, be able to enter into contract with a con- 
sumer for a period longer than thirty-five years. This is a very 
heavy burden which cannot be borne by the hydro-electric indus- 




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WATER POWER LEGISLATION 57 

try without serious detriment. It is, so to speak, a placing of 
shackles upon legitimate and praiseworthy industrial develop- 
ment; it greatly injures both the power investor and the con- 
sumers of the power. Whom does it benefit? The duration and 
the terms of contracts extending beyond the lease period should be 
approved in all cases by the duly constituted State authorities. 

6. Section 8 provides that the rentals for Government lands 
may, in the discretion of the Secretary of the Interior, be based 
on the power developed at any site involving Government lands. 
This is a direct Federal tax on power production — a tax on West- 
ern development. It is wrong in principle. The Government 
holds its land as proprietor and the rentals for that land should 
be on the basis of the value of the land. In other words, the Gov- 
ernment should receive fair remuneration for the use of its land, 
but the Government cannot, in fairness, use the power of might 
to extort from the Western communities a higher rental than 
would be allowed for the same land were it privately owned. 

There can be no essential difference in equity between the basis 
of compensation to be paid to the Government for the use of its 
lands and that underlying the compensation paid to Farmer Jones. 
If the land occupied by a water power development is owned in 
part by the Government and in part by Farmer Jones, the land as 
a whole has a well-defined value for power purposes. Farmer 
Jones should receive as much, and no more per unit of actual value 
contributed for his land than the Government receives, and con- 
versely the Government is entitled to compensation on exactly the 
same basis as that given to Farmer Jones. If, however, the Govern- 
ment is compensated on the basis of power delivered at a rate to be 
determined in the case of each lease by an administrative officer, it 
will certainly occur that in many cases the lessee will be paying 
the Government a price which, if extended to cover all the land 
involved in the site, would render the power project a financial 



58 THE WATER POWER PROBLEM 

impossibility. In such event, Farmer Jones and his neighbors — 
who may, perhaps, own, say, 94 per cent of the land necessary 
for the complete power development — Avill be unable to sell or 
use their water power lands. Clearly, this is in effect equiva- 
lent to the confiscation of the water power lands of Farmer Jones 
and his neighbors through the exercise of the arbitrary right 
of might by the Federal Government, owning in this case only 
6 per cent of the power site lands. 

7. Section 17 provides that in cases where a lessee proposes to 
occupy a power site containing 5 per cent or less of Government 
land, the Secretary of the Interior may, in his discretion, waive 
such terms of the Act as he may think best and impose such new 
terms and rentals as he may deem just. Why 5 per cent? Upon 
what principle is 5 per cent exempted rather than 6 per cent, 7 per 
cent or some other ratio? Or was this figure selected upon any 
principle? The fundamental defect in the "Ferris Bill" as passed 
by the House Avas its indefiniteness from the investment stand- 
point. It left to the discretion of an administrative officer the de- 
termination of many points vital to the integrity of the water 
power investment. This section establishes in a most extreme 
form, this unbridled discretionary power which the committee 
largely eliminated from the preceding sections of the bill. Irre- 
spective of the proportion of Government land occupied, whether 
it be five per centum or more, the Government should be paid a 
fair rental for said land based on its value for all purposes. Upon 
what principle of equity should industry, and particularly the 
struggling agricultural communities of the arid West, be forced 
to pay more? 

8. Section 20 provides that the lands leased and the works 
created thereon may be used or enlarged by another person than 
the lessee for the purpose of "impounding water for irrigation, 
mining, municipal, domestic and other beneficial purposes." In 



WATER POWER LEGISLATION 59 

other words, the original lessee who erects a dam and thereby cre- 
ates a fall for water power must, in case he can not use all the 
water while he is building up his business, donate the benefit 
of that improvement to one who may, without expenditure for a 
dam, enter into destructive competition, possibly for purposes 
of mere blackmail. It is only fair that any subsequent developer 
who makes use of a lessee's structure should be made to pay the 
reasonable proportionate cost of the benefits which he acquires 
from the original lessee's structures. __ 

Three other water power bills concerning public land sites were 
introduced into the Sixty-third Congress, viz. : S. 6712, by Senator 
Jones of Washington; S. 7071, by Senator Works of California, 
and S. 7101, by Senator Smoot of Utah. It will be instructive to 
refer briefly to these bills in order to illustrate the points of view 
of the authors and to compare them with the underlying theory of 
the "Ferris Bill." 

The "Jones Bill," S. 6712, provides for a grant of lands for 
a definite period under stipulations designed to protect the public 
interest, said grants available to all alike who comply with the 
law as enacted by Congress. With respect to the moot question 
of Federal vs. State sovereignty, the bill avoids extremes in either 
direction. It leaves to the United States the present and future 
control and disposition of the public lands, retaining the title 
therein to the Nation and imposing rentals or taxes on the value 
of the land. It accords to the States the exercise of their own 
sovereignty over waters and the operation of the water power 
plants, except in so far as the same may interfere with navigation. 
The bill is entirely practicable from the investment standpoint 
and its passage would, without doubt, be rapidly followed by 
great power developments. 

The "Works Bill," S. 7071, was drafted on the conception that 
the ownership and control of water by the State is the main inci- 



60 THE WATER POWER PROBLEM 

dent in the granting of a water power concession or franchise, and 
that the land owned by the United States is a somewhat subordi- 
nate feature, the ownership of which confers on the Federal Gov- 
ernment no more sovereignty than would the land of a private citi- 
zen confer sovereignty on him; that the United States cannot, by 
mere stipulation with a willing grantee, deprive a State of com- 
plete sovereignty over the use of its water or over its purely intra- 
state developments. Accordingly, the Works BiJl provides that 
the United States shall grant the use of its land, without parting 
with the title thereto, said grant to be co-terminous Avith the 
grantee's right to the use of water. The rental for such land is 
based on the value of the land and whenever it is no longer 
needed in the beneficial use of the water under the State's 
authority, the land reverts to the Government. The bill is 
financially sound and investments would readily be made there- 
under. 

The "Smoot Bill," S. 7101, provides for the acquisition by the 
State, under certain conditions, of any public lands chiefly valua- 
ble for water power development. Any State possessing a public 
service commission or its equivalent, could, through said commis- 
sion, file application for such lands and receive patent thereon. 
Thereafter the State could not, under penalty of forfeiture of said 
lands, alienate the fee simple title or utilize the landis for any 
other purpose than that of power development and operation. The 
State, or those authorized under its laws, must develop the power 
and place the water to beneficial use and all power sold or deliv- 
ered therefrom must be under State authority as to rates and 
services. Thus the Smoot Bill is based in part on the same prem- 
ises as have been described for the Works Bill — that the beneficial 
use of the State's water is the controlling factor and that mere 
ownership of land is a mere incident; that inasmuch as sover- 
eignty over the water is vested in the State, said State and its 




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WATER POWER LEGISLATION 61 

citizens cannot lawfully be deprived of the incidents necessary 
to the exercise of that sovereignty, nor of the benefits to be derived 
therefrom. The bill is the antithesis of the Federal idea set up in 
the original "Ferris Bill," and if passed will effectively stimulate 
power development. It is a simple and effective measure which con- 
sistently sustains the long-established American theory and consti- 
tutional guarantee, that the sovereign States shall be on a par as 
to conduct and regulation of their internal affairs. 

For the benefit of those who wish to make critical analyses of 
the several bills discussed in preceding pages there is inserted in 
the appendix, first, a concise comparative parallel-column state- 
ment of the provisions of the "Adamson Bill" as passed by the 
House of Representatives, and the " Adamson- Shields Bill" as re- 
ported to the Senate ; second, similar parallel-column comparisons 
of (a) the "Ferris Bill" as passed by the House of Representatives ; 
(b) as reported to the Senate; (c) the "Jones Bill" and (d) the 
"Works Bill." Copies of the Jones, the Works and the Smoot Bills 
will also be found in the appendix along with the Adamson- Shields 
and the Ferris Bills. 



CONCLUSION 



If the author has been successful in expressing his beliefs, it 
must be apparent that he has not been contending for a water 
power law that deprives the people of any sovereignty, nor of any 
property rights that the people now, or in the future, may possess. 
Neither does the author desire that any water power grantee or 
lessee should even for a moment be exempt from sovereign control 
nor from complete regulation in the public interest. His con- 
tention is that the Government may preserve all these rights and 
powers and still do business on an honorable and constructive 
basis with the investor and guarantee to him a mutual contract 
that will not deprive him of the security of his investment. 

There have been some who, in reply to the arguments set forth 
in the foregoing pages concerning investment security, have asked, 
"Why cannot the investor trust the Government to do the right 
thing when the time comes ?" There are two answers to this, viz. : 

1. The investor has learned that, in dealing with Government, 
with its changing administrations and shifting policies, he 
must have his contracts and other legal instruments as air- 
tight as though he were dealing with a private party. There are 
many cases which could be cited in support of this contention but 
the ones which bear more directly upon the isubject here dis- 
cussed consist of the revocation of twenty-five water power permits 
by a Secretary of the Interior just before he went out of office in 
March, 1909. Under some of the permits so revoked millions 
had been spent and the plants had been constructed and 
were in operation. There was no allegation in any of these 
cases that the permittees had violated law or regulation 
or had in any way failed in their obligations assumed under 



CONCLUSION 63 

the terms of the permits; nor had the public complained in 
any way that they were not being faithfully and efficiently iserved. 
The plainly stated pretext was that the Department had made new 
regulations and desired to bring all previous permittees under 
them. Up to the time these revocations were made, investors 
had not been suspicious of the Act of 1901, notwithstanding the 
fact that by the terms of that Act, permits secured thereunder 
were revokable at the discretion of the Secretary of the Interior. 
The investors had been advised by well-qualified legal authorities 
that construction and development gave them a vested interest — 
an interest which could not be revoked at the will of an adminis- 
trative official. There was also a comfortable feeling that the 
Government might be expected to set the example in the matter 
of good faith and fair dealing and investors commonly believed 
that the Government would not, in the absence of misbehavior 
on the part of any permittee, revoke a permit and thereby ruin 
the credit standing of a water power company and subject the 
security holders to great and irreparable loss. Yet these unfor- 
tunate revocations did occur and numerous ejectment suits are 
now pending in the Federal Courts. Confidence in such permits 
or implied promises of Government can never be restored. 

It should also be mentioned that this lack of trust by investors 
is intensified by the commercialized muck-raking in periodicals, 
newspapers and on the public platform, which has been aimed at 
water power men during the past few years. Muck-raking has 
become an avocation — a matter of bargain and sale, and abuse is 
applied irrespective of guilt or innocence. It is not strange that 
the prudent investor backs away from a water power franchise 
based on Government discretion or revocable promise instead of 
on a Government contract, when the only men whose water power 
efforts have borne fruit are the very ones who, irrespective of their 
deeds or intentions, have been lumped together and called unclean 



64 THE WATER POWER PROBLEM 

by the muck-rakers, whose sole object is personal gain or notoriety. 

2. The second answer to the foregoing question is that it is 
necessary that a Government grantee shall be able to rely upon a 
definite grant rather than upon the grace of the ever changing ap- 
pointive officials. The Government would not issue a bond cloud- 
ed with such uncertainty, and in like manner the Government 
should not even think of issuing a grant under which the grantee 
will have to offer an uncertain and possibly worthless bond to the 
public. That which the Government has found necessary to the 
integrity of its own securities should not be denied those who have 
devoted their money to a public enterprise and are working under 
a Government concession as honest and faithful public servants. 

Confidence in water power investments cannot be restored by 
mud-islinging speeches and writings. We cannot hasten the day 
of water power development by calling each other fools or rogues, 
or by inciting class against class or by promoting prejudices. The 
man who is skillful enough to build and operate a water power 
and the man who is brave enough to finance it are surely deserv- 
ing of reward, and they are not, by such acts, necessarily made 
over into thieves and oppressors as some would have us believe. 
On the other hand, the man who stands fast for a fair and right- 
eous deal to the public is not a charlatan and a seeker for cheap 
notoriety, as others would have us believe. 

As has already been remarked, all parties are very close to- 
gether. Some of the remaining differences are mere matters of 
terminology. Instead of "bawling out" a proposal merely be- 
cause it is advanced by a water power man, would it not be better 
to get beneath the surface and judge it upon its merits? Instead 
of scoffing at another proposal merely because a "conservationist," 
without water power experience, expresses it, let us see whether 
it does not have that estimable advantage of perspective. We want 
water power development as soon as possible, and it makes not a 



CONCLUSION 65 

shade of difference who, in the controversy of the past eight years, 
has been right and who has been wrong. The cause is bigger than 
any man or group of men. Let us forget the past and start new. 

We are sure of a few things : 

1st. That it is not safe nor ultimately profitable to conduct 
an industry in a wrongful manner; this is one of the axioms of 
modern business and the successful water power business rests 
absolutely upon it. 

2d. That the water power men do not expect to get from the 
Government more than is fair, and they do not expect to conduct 
their business in a wrongful manner. If they had other expecta- 
tions or intentions, Congress would see to the one and public serv- 
ice commissions to the other. 

3d. That there will be no water power development commensu- 
rate with the resources of the country unless Congressional legisla- 
tion will so safeguard development as to encourage investors to 
put their savings into water power enterprises and thus permit 
water power companies to obtain ample capital at reasonable rates. 

4th. That Congress and the various State legislatures can con- 
trol water power companies engaging in public service business — 
can control their rates and service — and it is not necessary to 
impose conditions hindering or restricting development and the 
acquisition of capital in order to insure fair treatment of the con- 
sumer. 

5th. That every petty burden and every irritating limitation 
placed on a water power development for the purpose of "protect- 
ing the public" is and must be paid for by the public. Therefore, 
in setting up these things for the public good, it is always well to 
ascertain whether or not some of the many obstructions really are 
for the public good and whether in each case the good derived is 
commensurate with the cost. It is only when the benefits equal 
or exceed the cost that such things are wise. 



66 THE WATER POWER PROBLEM 

6th. Finally and most important — water powers on the public 
lands aud on the navigable streams will always be commercially 
inferior to and will lag behind those developed on non-navigable 
streams and on private lands unless the conditions and stipula- 
tions governing the former are at least as favorable as those gov- 
erning the latter. 

Henry J. Pierce. 

Seattle, Wash., August 1, 1915. 



" "J*.. 

.4 . 

















APPENDIX A 



COMPARATIVE REVIEW OF THE PROVISIONS OF 

THE "ADAMSON BILL" AND THE 

"ADAMSON-SHIELDS BILL" 



ADAMSON BILL (H. R. 16053) 



as passed by the House of Representa- 
tives. 

Authority. — The requirement that 
consent to develop water power must 
be obtained, in each individual case, 
from Congress would prevent the early- 
development of our water powers. 
(Sec. 1.) 

Capacity of Grantee. — Any person, 
corporation or association may become 
grantee whether or not possessing 
qualifications recognized by a State. 
(Sec. 1.) 

Tenure. — One year preparatory ; 
three years for construction; fifty 
years tenure. (Sees. 9, 10 and 12.) 



Recapture. — By giving two years' 
notice, the Government may purchase 
from the lessee at the end of fifty 
years "all of the property of the grantee 
necessary and useful for the genera- 
tion, transmission or distribution of 
power, including all property to initial 
point of distribution." This would 
leave on the grantee's hands all dis- 
tribution property dependent for its 
usefulness and existence on the power 
production property taken from it by 
the Government. In the interest of 
both seller and purchaser, both the 
power production and distributing 
property should, if purchased, all pass 
intact from the grantee to the Gov- 
ernment. 



ADAMSON-SHIELDS BILL (H. R. 
16053) 

as reported by the Senate Committee 
on Commerce. 

Authority. — The authority given to 
the Secretary of War to grant permits 
would make possible the early develop- 
ment of our water powers, provided the 
terms of the grant were such as to 
enable the grantee to obtain capital 
for development purposes. (Sec. 1.) 

Capacity of Grantee. — A grantee for 
public utility uses must possess law- 
ful qualifications under State laws. 
(Sec. 1.) 



Tenure. — Two years preparatory ; 
five years for construction, if actually 
needed under diligent procedure; fifty 
years tenure, and pending the decision 
of the Government as to which course 
it shall then take (see below under 
"Recapture"), the original grant shall 
continue ander the same terms and 
conditions. 

Recapture. — The Government may 
take over at any time after fifty years 
"all the property of the grantee, de- 
pendent in whole or in part for its 
usefulness on the rights herein granted 
which are necessary and appurtenant 
or acquired and valuable or servicea- 
ble in the distribution of water or in 
the generation, transmission and dis- 
tribution of power." 

All of the above described property 
would be necessary for full operation 
and distribution if taken over by the 
Government for itself or a new grantee, 
and any portion of it left on the hands 
of the original grantee would be value- 
less to him except for disposition as 
junk. 



08 



THE WATER POWER PROBLEM 



ADAMSON BILL — Continued 



ADAMSON-SHIELDS BILL— Cont'd 



The Bill provides that if the Govern- 
ment takes the property, it shall pay- 
actual cost for lands, depreciated value 
of structures and nothing for "intangi- 
ble elements." 

The provision that the Government 
or a new grantee should assume exist- 
ing contracts made in good faith is in 
effect the same as in the Shields Bill. 

At the end of the 50-year tenure, the 
Government has four options: 

a. May purchase the property by 
authority of Congress and operate it. 

b. May renew the grant to existing 
grantee. 

c. Grant may be transferred to a 
new grantee. 

d. May do nothing and leave the 
original grantee at end of tenure with 
property on his hands and no franchise 
or right to operate it. 

The uncertainty as to what the Gov- 
ernment would do would prevent capi- 
tal from entering the water power 
field. (Sec. 10.) 



The bill provides that the grantee 
shall be paid the fair value of the prop- 
erty, meaning the value of the land at 
the time it is taken over and the de- 
preciated value of structures, together 
with such other elements of value as 
may be fair and lawful. Contracts 
which have been entered into in good 
faith and under reasonable conditions 
are to be assumed by the Government, 
but nothing is to be paid for them. If 
the grantee and the Government can- 
not agree upon prices for the property, 
it shall be left to the district Federal 
court for decision. 

By authority of Congress, the Gov- 
ernment may take over the property 
at any time after fifty years, and 

a. Renew the grant to the original 
grantee on such terms as may be 
authorized by then existing law. 

b. Grant the privilege to a new 
grantee on such terms as it may be 
able to secure; 

c. Operate it itself. (Sec. 6.) 



Payments to Government. 



Payments to Government. 



a. Such rental charges for privilege 
as Secretary of War may impose; first 
rental rate to operate 20 years and 
then a readjustment, to be followed by 
subsequent adjustments every ten 
years thereafter. 

b. For cost of investigation neces- 
sary for approval and for supervision 
of construction. 

c. For benefits derived from head- 
water improvements of every kind. 

d. For lands of United States occu- 
pied, such charges as may be fixed by 
Secretary of War. 

e. For cost of removing structures 
at any time Secretary of War shall be- 
lieve navigation has been injured. 
(Sees. 2 and 4.) 

Character of Plans. — The Secretary 
of War is directed to require that the 
plans shall be "best adapted to con- 
serve and utilize in the interest of 
navigation and water power develop- 
ment, the water resources of the re- 
gion." 



a. No rental charge for privilege. 

b. Same as (b) opposite. 

c. Same as (c) opposite. 

d. Same as (d) opposite. 

e. No provision for destroying the 
works of the grantee without indem- 
nity, unless grantee commits an unlaw- 
ful act. 

No Federal tax upon the develop- 
ment of water power is imposed. The 
taxation, if any, is left to the States to 
impose. 



Character of Plans. — The Secretary 
of War is "directed" to accept the 
plans of the applicant "best qualified 
to expedite and realize the maximum 
useful development of all the water re- 
sources of the region." 

An additional requirement not speci- 
fied in the Adamson Bill requires that 
the applicant must first comply with 
the laws of the State. (Sec. 2.) 



APPENDIX A 



69 



ADAMSON BILL — Continued 



ADAMSON-SHIELDS BILL— Cont'd 



Locks. — The bill makes it obligatory 
upon the grantee to provide locks for 
navigation facilities whenever, during 
the term of the grant, the Secretary 
shall determine that such improve- 
ments are needed for navigation pur- 
poses. 

This holds over the head of the 
grantee an expenditure, which may be 
demanded at any time, equivalent in 
some cases to the entire cost of the 
power plant. A lessee is entitled to 
know before he invests his money and 
that of his backers approximately what 
his investment is going to be. There 
can be no surety under the Adamson 
Bill in this respect. 

In case Government builds locks, 
grantee must convey land needed free 
of cost to Government, and furnish 
free power to construct and operate 
same. (Sees. 2 and 3.) 



Locks. — Under the Shields Bill, the 
Secretary of War has ample authority 
to secure from a grantee all navigation 
improvements, the only difference be- 
tween this and the Adamson Bill being 
that the Secretary of War must specify 
his demands at the beginning and 
thereby enable the grantee to have 
some assured financing. 

In case Government builds locks, 
same requirements as in Adamson Bill. 
(Sec. 2.) 



Power at Government Dams. — The 
right to the use of surplus water in 
Government built and owned dams may 
be granted for 50 years, subject to 
payment of reasonable rentals, for an 
initial period of twenty years, and re- 
adjustments at the end of each 10-year 
period thereafter, preference being 
given to municipal corporations. (Sec. 
14.) 



Power at Government Dams.— The 
right to develop power at Government 
built or owned dams may be granted 
by the Secretary of War under "such 
terms as may be deemed by the Secre- 
tary of War for the best interest of 
the United States and reasonable and 
fair to both parties," and in awarding 
such lease, preference shall be given 
to the applicant whose plans are deem- 
ed best adapted to conserve and utilize 
in the public interest the navigation 
and power resources of the region. 



Public Lands. — The bill provides 
that any public lands necessary for 
power development in connection with 
improvement of navigation may be ob- 
tained only through the President 
withdrawing them for that purpose. 

The bill gives no right to the exer- 
cise of eminent domain for securing 
public lands necessary for power pur- 
poses in connection with navigation 
improvement. (Sec. 4.) 



Public Lands. — The bill provides 
that the grantee may use public lands 
certified by the Secretary of War as 
being necessary for navigation pur- 
poses upon the withdrawal of the same 
by the President for such purposes 
and by payment of such rentals as 
may be fixed by the Secretary of War. 

The bill gives no right to the exer- 
cise of eminent domain for securing 
public lands necessary for power pur- 
poses in connection with navigation 
improvement. (Sec. 2.) 



Assignment. — Assignment of grant 
can only be made with the consent of 
the Secretary of War. (Sec. 8.) 



Assignment. — No assignment of the 
grant except for purposes of financing 
can be made without the approval of 
the Secretary of War to "any trans- 
feree not having the qualifications here- 



70 



THE WATER POWER PROBLEM 



ADAMSON BILL— Continued 



ADAMSON-SHIELDS BILL — Cont'd 

in specified for a grantee hereunder," but 
"any successor or assign of the rights 
of any such grantee shall be subject to 
all the conditions of the permit to the 
same extent as though such successor 
or assign were the grantee hereunder." 
(Sec. 1.) 



Regulation. — Secretary of War given 
authority to regulate rates and service 
in interstate business, but whenever a 
State maintains regulation which shall 
be equitable as between States, Secre- 
tary may forego this. No authority 
given Secretary to regulate intrastate 
rates in cases where State fails to do 
this. Publicity of accounting provided. 
(Sec. 11.) 



Regulation. - — Congress reserves 
right to regulate interstate rates and 
service. Secretary of War authorized 
to regulate intrastate rates in States 
which have provided no regulatory 
functions. Regulation of intrastate 
rates in States that have provided 
regulatory functions left to those 
States and nothing shall interfere with 
rights of States to so regulate or tax. 
(Sec. 7.) 



Authority Over Navigation Struc- 
tures. — This bill may deprive Secre- 
tary of War of exclusive authority over 
navigation-power structures, because 
in cases where public lands are utilized 
and the President has not withdrawn 
said land from entry for the sole pur- 
pose of navigation, the Secretary of 
the Interior has joint jurisdiction with 
the Secretary of War. (Sec. 3.) 



Authority Over Navigation Struc- 
tures. — Provides for only one author- 
ity — the Secretary of War — recogniz- 
ing that the navigation purpose is 
paramount; that the authority of said 
Secretary over navigation is, and long 
has been, exclusive, that the mere in- 
cident of public land occupation can- 
not change the real paramount pur- 
pose, and that it is not productive of 
real progress to divide jurisdiction. 
(Sec. 2.) 



Navigation Interests. — Dam and ac- 
cessory works operated under control 
of Secretary of War and navigation is 
paramount. (Sec. 5.) 



Navigation Interests. — Same as 
Adamson Bill. (Sec. 3.) 



Penal Clause. — Provides full penal- 
ties for all violations of law and law- 
ful regulation and gives Secretary of 
War authority to remove or destroy 
the works at expense of grantee. (Sec. 
7.) 



Penal Clause. — Provides same full 
penalties, except in the extreme case, 
the court may decree the sale of the 
works and the innocent stockholders 
of the offending company may secure 
such residue of their investment as 
may be derived from said sale. This is 
quite different from the Adamson Bill, 
under which the sins of company offi- 
cers may be punished by totally de- 
stroying the investment of minority as 
well as majority stockholders. (Sec. 8.) 



Repeal. — In reserving the right to 
alter, amend or repeal, the bill specifies 
that in such case the lessee shall re- 
ceive no compensation for damage or 



Repeal. — In reserving the right to 
alter, amend or repeal, the bill respects 
the property rights of the grantee if 
injured by any change in the law. If 



APPENDIX A 



71 



ADAMSON BILL— Continued 



ADAMSON-SHIELDS BILL— Cont'd 



confiscation or rendering operation un- 
profitable through changes in the law. 
This would prevent the development 
of water powers and the enlistment of 
capital more effectively than the rev- 
ocable feature of the present law, for 
capital never would invest with such 
danger of total or partial loss hanging 
over it. 



the grantee builds his plant in good 
faith under a permit issued under the 
law, he is entitled to this protection in 
all equity and justice and such a con- 
dition is a necessity to successful 
financing. 



APPENDIX B 



COMPARATIVE REVIEW OF PUBLIC LANDS WATER POWER 



H. R. 16673 (FERRIS BILL) 

as passed by the House of Representa- 
tives. 



H. R. 16673 (FERRIS BILL) 

as reported by Senate Committee on 
Public Lands. 



1. The Lease — How Made. — The 
Secretary of the Interior is "author- 
ized and empoioered' 1 '' to lease power 
site lands — i. e., he may use his dis- 
cretion both as to the granting or the 
refusing of the lease to an applicant 
and in contested cases as to the selec- 
tion of the favored applicant. (Sec. 1.) 



1. The Lease — How Made. — The 
Secretary of the Interior is "directed" 
to lease to any properly qualified per- 
son who shall comply with the law 
passed by Congress, and who is author- 
ized by the btate to use the water. 
(Sec. 1.) 



2. Specific Terms. — Leases grant- 
ed "under general regulations to be 
fixed" by the Secretary, and "under 
such terms and conditions as he may 
prescribe, not inconsistent with the 
terms of the Act." That is, the Secre- 
tary is given absolute discretion as to 
specific terms not covered by the Act 
and may discriminate between parties. 
(Sec. 1.) 

3. Public Lands Exempted From 
Terms of Bill. — National parks and 
military reservations; in the case of 
other reservations no lease shall be 
given unless the chief officer of the De- 
partment in charge shall certify that 
the same will not interfere with the 
purposes of the reservation. (Sec. 1.) 

4. Qualifications of Lessee. — Citi- 
zens of the United States or any asso- 
ciation of such or any corporation duly 
organized under State or Federal laws. 
(Sec. 1.) 



2. Specific Terms. — Leases grant- 
ed "under general regulations to be 
fixed" by the Secretary "not inconsis- 
tent with the terms of the Act." That 
is, the Secretary must treat all appli- 
cants alike. (Sec. 1.) 



3. Public Lands Exempted From 
Terms of Bill. — Same as House Bill. 
(Sec. 1.) 



4. Qualifications of Lessee. 
as in House Bill. (Sec. 1.) 



-Same 



5. Period of Lease. — Discretionary 
with Secretary of the Interior but not 
longer than 50 years, and at the end 
thereof the Government may do one 



5. Period of Lease. — Fifty years, 
unless the applicant and the Sec- 
retary agree on a shorter period 
as the applicant may elect, and at the 



APPENDIX B 



MEASURES PROPOSED OR CONSIDERED IN 63d CONGRESS 



S. 6712 (JONES BILL) 

which was not reported by 
Committee on Public Lands. 



S. 7171 (WORKS BILL) 

Senate which was not reported by Senate 
Committee on Public Lands. 



1. The Grant — How Made. — The 
bill makes affirmative grant to quali- 
fied applicants who shall comply with 
its terms and submit proof of their 
right to use the water. (Sec. 1.) 



1. The Grant — How Made. — Af- 
firmative grant to qualified applicants 
who shall submit proof of right to use 
the water under State laws. (Sec. 1.) 



2. Specific Terms.— Set forth in 2. Specific Terms. — Set forth in 

the bill or determined by State laws. the bill or determined by State laws. 



3. Public Lands Exempted From 
Terms of Bill. — None. 



3. Public Lands Exempted From 
Terms of Bill. — None; except in Na- 
tional forests, National monuments and 
Indian reservations, the location shall 
be such as not to interfere with the^ 
purposes of said reservations. (Sec. 1.) 



4. Qualifications of Grantee. — 
Any State or municipal corporation or 
any mutual or public service corpora- 
tion or person authorized by the State 
to conduct power business, except in 
developments of 1,000 h. p. or less, in 
which case no special qualifications are 
necessary. (Sees. 1 and 13.) 



4. Qualifications of Grantee.— 
Same as Jones Bill. (Sec. 1.) 



5. Period of Grant. — Fifty years, 
after which the Government may take 
over the property at any time, either 
for itself or for conveyance to a third 

(8) 



5. Period of Grant. — Runs coter- 
minous with right of grantee or his 
successors to use the water under State 
authority, and if water rights are lost 



74 



THE WATER POWER PROBLEM 



H. R. 16673 — Continued 

of four things: (a) take over the prop- 
erty; (&) lease to the original lessee; 
(c) lease to a new party who may be 
favored by the administrative officer, 
notwithstanding the fact that the orig- 
inal lessee may have conducted him- 
self lawfully and honorably; (d) may 
do nothing and thereby leave the prop- 
erty without title. There is absolutely 
no guaranty that the Government will 
make any disposition of the lease at 
expiration. This means an impaired 
and uncertain investment from the 
start. (Sees. 1, 5 and 6.) 



H. R. 16673 (Senate) — Continued 

end thereof the Government may do 
one of four things: (a) take over the 
property; (&) lease to the original 
lessee who has preference right over 
any other party upon such terms and 
conditions as then existing law shall 
authorize; (c) lease to a new party if 
original lessee fails to renew; (d) may 
do nothing, in which event the lease 
may continue under terms as may then 
be in force. (Sees. 1, 5 and 6.) 



6. Construction and Operation. — 
Provides for diligent, orderly and rea- 
sonable development and continuous 
operation subject to market conditions. 
(Sec. 2.) 



6. Construction and Operation. — 
Same as House Bill. 



7. Leases to States and Munici- 
palities. — The Secretary may give 
preference to applications for leases 
by States and municipalities. (Sec. 1.) 



7. Leases to States and Munici- 
palities. — Same as House Bill. (Sec. 1.) 



8. Sales to One Consumer. — The 
Bill forbids a lessee to contract for the 
delivery of more than 50 per cent of 
his output to one person irrespective 
of whether such a limitation would 
prevent financing, prohibit large man- 
ufacturing development, or allow a 
portion of the product of a developed 
site to go to waste. (Sec. 2.) 

9. Regulation. — Rates and service 
and the issuance of securities are to 
be regulated by the Secretary of the 
Interior in interstate cases; also in 
intrastate cases where States have not 
provided for regulatory procedure. 
(Sees. 3 and 9.) 



8. Sales to One Consumer. — The 
Bill makes no fanciful and artificial 
limitations on the sale of energy and 
puts no shackles on commendable in- 
dustrial enterprise, leaving the deter- 
mination of offenses against the law 
of the land to the courts, under pro- 
cedure prescribed by the sovereign. 



9. Regulation. — Interstate rates 
and service and the issuance of securi- 
ties are to be regulated by the Inter- 
state Commerce Commission. Intra- 
state rates, service and security issues 
in those States which have provided 
no regulatory procedure are to be reg- 
ulated by the Secretary of the Interior. 
(Sees. 3 and 9.) 



APPENDIX B 



75 



S. 6712 — Continued 

party. In the event that the United 
States does nothing, the grant contin- 
ues as originally given. This preserves 
title to the property and prevents de- 
pression of investment. (Sec. 2.) 



S. 7171 — Continued 

or forfeited so that the water cannot 
be used in connection with the land, 
said land reverts to the United States 
or to such successor in interest as may 
possess rights to use the water. If ter- 
minated by State, the land reverts to 
the United States. (Sec. 5.) 



6. Construction and Operation. — 
The grantee is given two years to com- 
mence construction and five years fur- 
ther to complete if so much time is 
necessary under continuous and dili- 
gent procedure. Extensions may be 
granted by President when, in his 
judgment, the public interest will be 
promoted thereby. The grantee must 
operate to the extent deemed by the 
Secretary necessary to supply ade- 
quately the needs of the available mar- 
ket. (Sec. 6.) 

7. Grants to States and Munici- 
palities. — The Bill commands that the 
grant approved by the Secretary shall 
be the one which "will promote the 
highest and greatest practicable use of 
the water resources involved." (Sec. 2.) 



6. Construction and Operation. — 
The grantee is given one year to com- 
mence construction and five years to 
complete, if so much time is necessary 
under continuous and diligent pro- 
cedure. The grantee is required to 
operate according to the public demand 
for power. (Sec. 5.) 



7. Grants to States and Munici- 
palities. — The matter of preferential 
grants is settled by the State. The 
grant is made to the applicant holding 
water rights from the State. (Sec. 2.) 



8. Sales to One Consumer. 
Ferris Bill (Senate) opposite. 



-See 



8. Sales to One Consumer. — See 
Ferris Bill (Senate) opposite. 



9. Regulation. — The Bill does not 
provide for grants in States which have 
not provided for regulation of public 
utilities. Rates and service in other 
States are to be regulated by such 
States. The United States reserves 
the right to regulate interstate rates 
and service. (Sees. 1 and 7.) 



9. Regulation. — Intrastate rates 
and service are placed under State 
authority. Interstate rates and service 
are placed under Interstate Commerce 
Commission. (Sec. 7.) 



76 



THE WATER POWER PROBLEM 



H. R. 16673 — Continued 

10. Combinations in Restraint of 
Trade. — The Bill forbids all acts of the 
lessee which accomplish restraint of 
trade. (Sec. 3.) 

11. Lawful Combinations. — A law- 
ful combination may be prevented by 
the Secretary of the Interior if in any 
particular case it does not please him. 
(Sec. 3.) 



H. R. 16673 (Senate) — Continued 

10. Combinations in Restraint of 
Trade. — Same as House Bill. (Sec. 3.) 



11. Lawful 
as House Bill. 



COMBINATIONS.- 

(Sec. 3.) 



-Same 



12. Sales to Distributing Compa- 
nies. — The Bill forbids, except upon 
consent of an administrative officer, 
the sale of power to a distributing 
company. It is immaterial, according 
to this bill, whether the lessee, by such 
sale, does or does not restrain trade, 
does or does not benefit the public, or 
whether the producer or the distribu- 
tor is or is not regulated by a sovereign 
as to rates, service, etc. The decision 
of the Secretary, wise or unwise, is 
final. (Sec. 4.) 

13. Assignment of Lease. — No 
Lease assignable or transferable with- 
out consent of Secretary of the Inter- 
ior (Sec. 4). This provision accom- 
plishes nothing except the further em- 
barrassment of a company that may be 
in financial straits. Neither the Gov- 
ernment nor the people care who holds 
a lease so long as the holder is under 
control. 



12. Sales to Distributing Compa- 
nies. — The Bill makes no mention of 
sales to distributing companies, places 
no obstacle in the path of proper devel- 
opment and leaves to the judiciary the 
duty of determining whether any act 
of the producer or distributor is in vio- 
lation of law or prejudicial to the pub- 
lic interest. The Bill assumes, by in- 
ference, that both producer and dis- 
tributor are subject to regulation in 
the public interest and that an offense 
is subject to punishment by sovereign. 

13. Assignment of Lease. — Leases 
may be assigned or transferred, but 
the successor is bound by all the obli- 
gations to Government of the original 
lessee. 



14. Liens or Mortgages. — No lien 
can be created on any water power 
property developed under a lease, 
whether the land so leased constitutes 
all or only a minute part of the devel- 
opment, without the approval of the 
Secretary of the Interior. (Sec. 4.) 

15. How the Property May Be 
Taken Over by the United States. — 
At any time after three years immedi- 
ately prior to lease expiration, United 
States may give three years' notice 
and take over all the property acquired 
by the lessee, dependent in whole or 
in part for its usefulness on the con- 
tinuance of the lease. (Sec. 5.) 



14. Liens or Mortgages. — No lien 
can be created on the land leased with- 
out the approval of the Interstate Com- 
merce Commission. (Sec. 4.) 



15. How the Property May Be 
Taken Over by the United States. — 
At any time after three years immedi- 
ately prior to lease expiration, United 
States may give three years' notice 
and take over all the property depen- 
dent in whole or in part for its useful- 
ness on continuance of the lease, or 
upon mutual agreement with the les- 



APPENDIX B 



77 



S. 6712 — Continued 



S. 7171 — Continued 



10. Combinations in Restraint of 
Trade. — The Bill forbids all acts of the 
grantee which result in restraint of 
trade. (Sec. 3.) 



10. Combinations in Restraint of 
Trade. — Covered by existing Federal 
and State laws. 



11. Lawful Combinations. — The 
Bill makes no provision for giving the 
Secretary authority to permit combina- 
tions of plants or lines, because as 
the bill defines the acts and practices 
which constitute restraint of trade, the 
violation of the law is left to deter- 
mination of the local body charged with 
regulation, or to existing Federal law. 



11. Lawful 

as Jones Bill. 



Combinations. — Same 



12. Sales to Distributing Compa- 
nies. — Same as Ferris Bill (Senate). 



12. Sales to Distributing Compa- 
nies. — Same as Ferris Bill (Senate). 



13. Assignment of Lease. — Left to 
State regulation. (Sec. 7.) 



13. Assignment of Lease. — The bill 
provides that assignment or transfer 
of water rights under State laws car- 
ries with it the lands granted by the 
United States for the use of the water. 
(Sec. 5.) 



14. Llens and Mortgages. — Left to 
State regulation. (Sec. 7.) 



14. Liens and Mortgages. — Left to 
State regulation. (Sec. 10.) 



15. How the Property May Be 
Taken Over by the United States. — 
Upon expiration of 50-year period or 
any time thereafter, Congress may pro- 
vide for termination of grant and dis- 
position of all the property dependent 
for its success on the rights granted. 
(Sec. 5.) 



15. How the Property May Be 
Taken Over by the United States. — 
Whenever the right to use the waters 
for the purposes of the grant shall be 
forfeited or otherwise terminated by 
the State wherein the land is situated, 
or by final adjudication in the courts, 
the land reverts to the United States. 
(Sec. 5.) 



78 



THE WATER POWER PROBLEM 



H. R. 16673 — Continued 



16. Compensation for Property 
Taken Over. — The Bill provides for 
payment on taking over, at expiration 
of lease, lands, water rights, etc., at 
actual cost, and of improvements at 
fair value, or, in other words, depreci- 
ated value, exclusive of intangibles. 
The lessee is thereby denied the bene- 
fit of any appreciation of property, but 
is penalized for full depreciation. 
(Sec. 5.) 



H. R. 16673 (Senate) — Continued 

see, the United States may take a 
severable and complete unit of any 
such power system. (Sec. 5.) 

16. Compensation for Property 
Taken Over. — The Bill provides for 
payment of fair value of property, 
which includes reasonable appreciation 
of property as well as depreciation. 
(Sec. 5.) 



17. Elements of Value Excluded 
From Compensation. — The Bill ex- 
cludes: (a) the value of the franchise; 
(o) good will; (c) profits to be earned 
on pending contracts; (d) all other in- 
tangible elements. (Sec. 5.) 

All the above are fair to the investor 
except (d) (Sec. 5). Intangible ele- 
ments cover many things necessary to 
the business for which legitimate cash 
expenditure is required. To deprive 
the investor of these would be nothing 
but confiscation of a goodly portion of 
the actual value of the property. 



18. Contracts for the Sale of 
Power Beyond Lease Period. — Con- 
tracts for the sale or delivery of power 
for periods not exceeding 20 years be- 
yond the life of the lease may be made 
if, in the judgment of the Secretary of 
the Interior, public interest justifies. 
No recognition is given to the fact that 
the States may possess some sover- 
eignty over contracts executed within 
them. Furthermore, if at the end of 
the thirtieth or fortieth year of the 
lease, an industrial condition should 
arise which required a 50-year con- 
tract, or if even at the beginning of the 
lease a perpetual contract should be 
required for irrigation, the lessee 
would be powerless. (Sec. 7.) 



17. Elements of Value Excluded 
From Compensation. — The Bill ex- 
cludes: (a) rights of way or other 
property of the United States under 
lease; (b) value of the franchise; (c) 
good will; (d) going concern; (e) fu- 
ture profits from pending contracts or 
prospective revenues, profits or divi- 
dends. (Sec. 5.) "Going concern" has 
been declared legitimate by the U. S. 
Supreme Court. It represents legiti- 
mate cash paid by the business, and to 
deprive the investor means non-pay- 
ment for a portion of actual value of 
property. 

18. Contracts for the Sale of 
Power Beyond the Lease Period. — 
May extend twenty-five years beyond 
lease period if approved by State pub- 
lic service authorities and Secretary 
of Interior. (Sec. 7.) 



19. Federal Tax. — For the occu- 
pancy and use of Government lands, 
the Secretary of the Interior may use 
his discretion in raising revenue 
(which sovereign authority the Consti- 
tution gives only to Congress) and may 



19. Federal Tax.- 
Bill (House). 



-Same as Ferris 



APPENDIX B 



79 



S. 6712 — Continued 



S. 7171 — Continued 



16. Compensation for Property 16. Compensation for Property 

Taken Over. — See Ferris Bill (Senate) Taken Over. — Settlement to be in ac- 
opposite. (Sec. 5.) cordance with State laws. 



17. Elements of Value Excluded 
From Compensation. — The Bill ex- 
cludes as an element of value the use 
of or the right to use the lands ac- 
quired under the terms of the Act. 
(Sec. 3.) For the other elements, Con- 
gress would provide in each case. (Sec. 
5.) 



17. Elements of Value Excluded 
From Compensation. — The Bill allows 
no compensation or value in connec- 
tion with the rights obtained or used 
under the Act. (Sec. 4.) 



18. Contracts for the Sale of 
Power Beyond Lease Period. — Con- 
tracts for the sale or delivery of power 
may be made for periods extending be- 
yond the period of lease when the pub- 
lic interest requires (not when requir- 
ed in the judgment of the Secretary) 
and on the approval of the appropriate 
State authority. (Sec. 4.) 



18. Contracts for the Sale of 
Power Beyond Lease Period. — Regu- 
lated by terms of water rights in 
States. 



19. Land Rentals. — The United 
States is to be paid 5 per cent interest 
on the appraised fair value of the pub- 
lic land occupied. 



19. Land Rentals. — Provides that 
fair value of lands including enhance- 
ment by reason of special adaptability 
for power purposes, shall be determin- 
ed. Provision for payment of said 
value evidently omitted by author 
through inadvertence. 



80 



THE WATER POWER PROBLEM 



H. R. 16673 — Continued 

base Federal taxes on the amount of 
power developed by the State's water. 
(Sec. 8.) 



H. R. 16673 (Senate) — Continued 



20. Accounts and Reports. — Secre- 
tary of the Interior authorized to ex- 
amine books and accounts and require 
statements and reports, notwithstand- 
ing the fact that a lessee may be oper- 
ating entirely within one State and 
thereby is subject to State laws. 



20. Accounts 
as House Bill. 



and Reports. — Same 



21. States' Control of Water. — 
States' control over use of water af- 
firmed notwithstanding the fact that 
many sections of the bill deprive the 
States of such control. (Sec. 14.) 



21. States' Control 
Same as House Bill. 



of Water. — 



APPENDIX B 



81 



S. 6712 — Continued 



S. 7171 — Continued 



20. Accounts and Reports. — The 
rendering of accounts and reports is 
left to the States, except that the 
United States reserves the right to do 
this in case of interstate service. (Sec. 
7.) 



20. Accounts and Reports.- 
der State control. 



-All un- 



21. States' Control of Water. — 
Deference is paid directly to States' 
authority (Sec. 2), and nothing in the 
bill seeks to violate or abridge that 
authority. 



21. States' Control of Water. — 
The whole bill is based on the assump- 
tion that the States' control of water 
is the main consideration. 



APPENDIX C 



Calendar No. 740 
ss, u r* 

3d Session. 



H. R. 16053 



[Report No. 846.] 

IN THE SENATE OF THE UNITED STATES. 

August 5, 1914. 

Head twice and referred to the Committee on Commerce. 

December 19, 1914. 

Reported by Mr. Shields, with an amendment. 

[Strike out all after the enacting clause and insert the part printed in italic] 



AN ACT 

To amend an Act entitled "An Act to regulate the construction of 
dams across navigable waters," approved June twenty-first, 
nineteen hundred and six, as amended by the Act approved 
June twenty-third, nineteen hundred and ten. 

1 Be it enacted by the Senate and House of Representa- 

2 tives of the United States of America in Congress assembled, 

3 That the Act entitled "An Act to regulate the construction 

4 of dams across navigable waters," approved June twenty - 

5 third, nineteen hundred and ten, be, and the same is hereby, 

6 amended to read as follows : 

7 " Section 1. That when consent or authority has been 

8 o r may hereafte r be granted by Congress, cither directly or 

9 indirectly through a n y duly au tho rized official or offic ials-of 



1 the United States, to any persons to construct and maintain 

2 a dam for water pow e r or oth e r purpos e across or in any of 

3 t he navigable waters of the United States, such dam shall 

4 not be built or commenced until the plans and specification s 

5 for such dam and all accessory works, together with such 

6 drawings of the proposed construction and such map of the 

7 proposed location as may be requir e d for a full unde r standin g 

8 o f the -sttbj€ ct, have be e n submitted to the Secre t ary of War 

9 and the Chief of Engineers for th e ir approva Veo r untH -tlrey 

10 shall have approved such plans a nd sp e cific at ions and th e 

11 location of such dam and accessory wor k s; and aft e r such 

12 approval it shall not be lawful t o deviate from such plans 

13 or specifications either before or after completion of t he 

14 structure unless the modification of such plans or specifica - 

15 tions has previously been submitted to and received the 

16 approval of - t he Secretary oiUWar^an d the Chief of Engineers . 

17 Such plans, specifications, and drawings shall be submitted 

18 within two years after the ^d^fte-of-the^pproval of the Ac t 

19 authorizing the construction . 

20 "Sec. 2. — That as a part of isueh-appro va l s u c h eo ndi- 

21 tions and stipulations may be impo se d as th e Secretary o f 

22 War and the Chief of Engineers may deem necessary to pro - 

23 tect the present and future inter e sts of the United Stat e s , 

24 which may include th e condition that the persons construct - 

25 ing or maintaining such dam shall construct, maintain, and 



3 

1 operate in connection therewith, without expense — to — the- 

2 United States, a lock or locks, booms, sluices, or any -ather- 

3 s tructure or structures which the Secretary of War and the 

4 Chief of Engineers or Congress at any time may deem neces- 

5 s ary in the interests of navigation, in accordance with such 

6 plans as they may a pprove ; and also that whenever Con- 

7 gress shall deem such facilities necessary, the persons owning 

8 such dam shall convey to the United-States, free of cost, title 

9 t o such land as may b e r e qu i r ed for such constructions and 

10 approaches, and shall grant to the United Stat e s free wat er- 

11 po wer or power generated from water power for building 

12 and operating such constructions, at th e discr e tion of the 

13 Secretary of War and Chief of Engineers, may b e required 

14 t o maintain and operate such lock without expense to the 

15 United States. — The Secretary of War may provide, as a 

16 c ondition of such approval, for the payment to the United 

17 States of reasonable annual charges for the benefits that 

18 accrue to the grantee by the authority given under this Act, 

19 and at the end of twenty years and every ten years thereafter 

20 t he Secretary of War may readjust the annual charges as may 

21 th en be just and reasonable. 

22 " Sec. 3. That as a part of said approval the Secretary 

23 of War and the Chief of Engineers shall require that the 

24 plans, specifications, and location for any dam shall be such 

25 as shall be best adaptQd to a c o mpreh e nsive plan for the 



4 

1 improvement of the waterway in question for the uses of 

2 navigation and for the full d evelopment of its water power 

3 a n d for other beneficial public purposes, a n d best a dapted t o 

4 conserve and utilize, in the intere st s o f n avigation an d w at er 

5 power development , thp water resources of the region . 

6 " Sec. 4. That as a part o f t he conditions and stipula - 

7 ti ons s uch approval shall provide — 

8 "(-a) — For reimbursement to the United States of al l 

9 expenses incurred by the United States with referen ce to the 

10 project, including the cost of any investigation necessary for 

11 the approval of the plan s a s heretofore provided, and for such 

12 sup e r vis ion of construction as may be necessary in the 

13 interest of the United States. 

14 " (b) For the payment to the United States of reason 

15 able charges for th e b e nefits which may accrue to such 

16 project through th e construction, operation, and maintenanc e , 

17 in and about such streams, by th e United States of headwater 

18 improv e m en ts of ev e r y— k ind, nature, and description, in- 

19 duding^storag e reser vo irs o r f o rested watersheds or land 

20 ownedy loca ted, or reserved by the United States at the 

21 headwaters of any navigable stream for the development, 

22 i mprovement, or preservation of navi ga t i on in such stream 

23 in which such dam may be located . — Such charges shall be 

24 fix e d f rom time to time by the Secretary of War and Chief 

25 of — Engineers, — based — upon — a reasonable — compensation 



1 e quitably apportioned among the grantee and others similarly 

2 situated upon the same stream receiving benefits by reason of 

3 incr e ase of flow past their water power structures artificially 

4 caused by such h e adwat e r improv e m e nts, th e total charg e s to 

5 all such beneficiaries from any such headwater improvem e nt 

6 not to exceed in any one year an amount equal to five per 

7 centum of the total investment cost, in addition to the neces- 

8 s ary annual expense of the operation of such headwater 

9 improvement. 

10 " (c) That in the construction, maintenance, and opera- 

11 tion of any project under this Act for the promotion of navi- 

12 gation, the grantee may, with the consent of the Secretary of 

13 War, use and occupy, when necessary for carrying out th e 

14 p roject, lands acquired by the United States through pur - 

15 chase or condemnation and any part of the public lands with - 

16 drawn by th e President from entry or disposition for the 

17 sole purpos e of promoting navigation, which the Pr e sid e nt 

18 may do, as provided in the Act e ntitl e d, 'An Act to authoriz e 

19 the Pr e sident of th e United Stat e s to make withdrawal of 

20 public lands in certain cases/ approved June twenty-fifth, 

21 nineteen hundred and ten. — Fo r any of such lands so used 

22 the grantee shall pay to the United States such charges as 

23 may be fixed by the Secretary of War. 

24 "(d) For the payment or securing the payment to the 

25 United States of such sums and in such manner as th e 



6 

1 Se cretary of War and the Chief of Engineers may deei n- 

2 reasonable and just substantially lo restore conditions upon 

3 such stream as to navigability, existing at the time of such 

4 approval, whenever the Secretary of War and the Chief of 

5 Engineers shall determine that naviga t ion has been injured 

6 by reason of the construction, maintenance, and opera t ion of 

7 is uch dam and its - accessory works. 

8 "S- ec. 5. — That the right is hereby reserved — to — the- 

9 United States to construct, maintain, and operate, in con- 

10 nection with any dam built in accordance with the provisions 

11 of this Act, a suitable lock or locks, booms, sluices, or any 

12 other structures for navigation purposes, and the operation of - 

13 navigation facilities which shall be constructed as a part of or - 

14 in connection with any dam built under the provisions of 

15 this Act, whether — at — the — expense of such grantee or of 

16 t he United States, shall at all times be subjec t — to — such 

17 r easonable rules and regulations in the inte re s t of navigation, 

18 including the control of the level of the pool caused by 

19 any such dam, as shall be made by the Secretary of War 

20 and Chief of Engineers, and in the use and operation of such 

21 navigation facilities the interests of navigation shall be para- 

22 mount to the uses of such dam by such grantee for power 

23 purposes. Such rules and regulations may include the 

24 maintenance and operation by such grantee, at its own 

25 expense, of such lights and other signals as may be directed 



7 

1 by the Secretary of War and Chief of Engineers and such 

2 fish ways as shall be prescribed by the Secretary of Com- 

3 ni o rcc, and for failure to comply with any such rule or rcgula - 

4 tion such grantee shall be deemed guilty of a misd e meanor, 

5 and upon conviction thereof shall be subject to a fine of not 

6 le ss than $500 for each month's default, in addition lo olher 

7 p enalties herein prescribed or provided by law . 

8 " Sec. 6. — That the persons constructing, maintaining, 

9 or operating any dam or appurtenant or accessory works, in 

10 accordance with the provisions of this Act, shall be liable 

11 for any damage that may be inflicted thereby upon private 

12 property, either by overflow or otherwise . 

13 "Sec. 7. That any grantee w^ho sha H fail or refuse to 

14 comply with the lawful order of the Secretary of War, made 

15 in accordanc e with the provisions o f this Act, shall be deemed 

16 guilty of a misdemeanor, and on conviction thereof shall be 

17 punished by a fine not exceeding $1,000, and every mon th 

18 such grantee shall remain in default shall be deemed a ne w 

19 offense and subjec t such grantee to additional penaltie s 

20 therefor; and in addition to said penalties the Attorney 

21 General may, on request of the Secretary of War, institute 

22 proper proceedings in the district court of the United States 

23 in the district in which such structure or any of its accessory 

24 works may, in whole or in part, exist, for the purpose of 

25 having s uc h vi o lation stopped by injunction, mandamus, of 

(9) 



8 

1 o ther process; and any i such district court shall have j uris=- 

2 diction over all such proceedings and shall have the poAver to 

3 make and enforce all writs, orders, and decrees necessary to 

4 compel the compliance with the requirements of this Act and 
.5 th e lawful orders of the Secretary of War and the perform- 

6 ance of any condition or stipulation imposed under the pro- 

7 v isions of this Act; and if the unlawful maintenance and 

8 operation are shown to be such as shall require a revoca- 

9 tion of all rights and privileges held under authority of this 

10 Act, the court may decree such revocation. — In case of such 

11 a decree, the court may wind up the business of such grantee 

12 conducted under the rights in qu e stion, and may declar e 

13 such dam and accessory works to be an unreasonable obstruc - 

14 tion to navigation and caus e their removal at the expense of 

15 t he grantee owning or controlling the same, except when 

16 the United States has b e en previously r e imbursed for such 

17 removal, or may provide for th e sale of the dam and all 

18 accessory and appurt e nant works constructed under au- 

19 th or i ty of this A c t for the further development of water 

20 power, and may make and enforce such other and further 

21 orders and decrees as equity demands; and in case of such 

22 a sale for the further development of water power the vende e 

23 shall — take the rights and privileges and — shall — perform 

24 the duties which belonged to the previous grantee, and shall 

25 assume such outstanding obligations and liabilities aris - 



ing out of t he maintenance and operat ion of said- dam -and 
acce ssory works for power purposes as the court may deem 




LP rigid 
oJLthis A ct and n o property o r project installed and operated 

6 under t h^provisions-or b enefits of this A ct sha ll he assi gn ed 

8 ret&r y of War, e xcept by trust deed or mortgag e issu e d for 

9 t he purpos e of financing the business of such owner, and 

10 an y succ e ssor or assign of such property or project or of 

11 an-^ rights -aceruin g hereunder, whether by voluntary trans- 

12 fery^adicia l sale, or foreclosure sale or otherwise, shall be 

13 subject to all the conditions of the approval under which 

14 s uch rights are held, and also subject to all the provisions 

15 and conditions of this Act to the same extent as though 

16 s uch successor or assign were t h e original owner hereunder . 

17 " Sec. 9. That the rights grante d herein shall continue 

18 for a period of fifty years from and after the date of the 

19 original approval, unless sooner revoked or forf e ited as pro 

21 "Sec. 10. That upon not less than two years' notice 

22 prio r to the expiration of any grant made hereunder, and at 

23 any tim e after the e xpiration of such grant, upon six months' 

24 notice, the Unit e d States, or any person authorized by Con- 

H. R. 16053 2 



10 

1 gr o ss, shall have the right to take over all of the property 

2 of the grantee n e cessary and useful for th e g e n e ration, trans 

3 mission, or distribution of power. — Such prop e rty shall in- 

4 elude the lands or interests in lands acquired or us e d for 

5 the purposes of the development and transmission of power, 

6 the dam and other structures, and the equipment necessary 

7 and useful for the generation of power, and the transmission 

8 system from generation plant to initial points of d istribution, 

9 and the lock or locks or other aids to navigation, but shall 

10 not include any other property Avhatsoever. — Before taking 

11 possession the United States or the person authorized by 

12 Congres s shall pay therefor (first) the actual cost to the 

13 grantee of lands or any interests th e rein purchased and u s ed 

14 by the grantee in the generation and dis t ribution of power, 

15 and (second) the fair value of the other properties tak en 

16 o ver, together with the cost to the grantee of the lock or locks 

17 o r oth er- aids to navigation and all other capital expenditures 

18 requir e d by the United States in assuming all contracts for 

19 eleetrie al energy extending beyond the granting period which 

20 hav e had or may have the approval of the Secretary of War, 

21 and which were entered into in good faith and at a rea sonable 

22 rate; — The act u al cost of lands or interests therein and the 

23 fair value of other property shall be determin e d by agree- 

24 ment between th e Secretary of War and the owne r s of such 

25 propert y, and in the e v e nt of their failure to agr ee- then by 



11 

1 proceedings instituted by the United States, or by th e per - 

2 son authorized by the United States, in the district court 

3 of the United States within which any portion of such dam 

4 may be located. 

5 "In determining the fair value of the property other than 

6 lands or interests in land s allowance shall be made for de- 

7 t eriora t ion, if any, of the existing structures and transmission 

8 l ines , and no value s hall be claimed or allowed for the rights 

9 h e reby grant e d, for g o od will, going concern , p r o fit in pend - 

10 ing contracts for e l e c t rical e nergy or for other conditions of 

11 current or prospective business or for any o ther intangible 

12 e l e m e nt. 

13 "Sec. 11. That in all cases where the electric current 

14 g e n e rat e d from or by any of the projects provid e d for in this 

15 A c t, including leases under section fourteen hereof, shall 

16 ent e r into interstate or foreign commerce, the rates, charges, 

17 and service for the same to the consumers thereof shall be just 

18 and reasonable, and every unjust and unr easona ble and un = 

19 duly discrimina t ory charge, rate, or service therefor is hereby 

20 prohibited and declared to be illegal; and whenever the 

21 Secretary of War shall be of the opinion that the rates or 

22 c harges demanded or collected on the service rendered for 

23 such electric current are unjust, unreasonable, or unduly dis - 

24 c riminatory, upon complaint made th e refor and full hearing 

25 thereon, th e S e cr e tary of War is hereby authorized and cm - 



12 

1 powered to determine and proscribe what shall b e th e ju &fe 

2 and r e asonable rates and charg e s ther e for to be observed a s 

3 th e maximum to be charged and th e s e rvice t o be rendered; 

4 an d in cas e of th e violation of any such order of the Secretary 

5 of War the provisions of this Act relative to forfeiture an d 

6 failure to comply shall apply. — That in the valuation for 

7 rate-making purposes of the property existing under sai d 

8 approval of the project there may be considered any lock 

9 or locks, or other aids to navigation, and all other capital 

10 expe nditures required by the United States, but no val ue 

11 shall be claimed or allowed for the rights hereby grante d f or 

12 good will, going concern, or any other intangible valu er 

13 "The — Secretar y — of — War — is — furthe r — author ized — and 

14 dir ected to include among the co ndit i on s for his approval of 

15 any plans or any project herein provided, including leases 

16 under — section fourteen — hereof, — as — an — express — condition 

17 t h e r e of, a clause reserving to the Secretary of War th e 

18 same rights, powers, and duties set forth in this section, 

19 together with the same penalty for violation thereof : Pro * 

20 v ided, That whenever the State in which such current shall 

21 be used shall hav e p r ov i ded by law adequate regulation for 

22 r ates, charges, and service to the consumers for such electri c 

23 c urrent and such regulation shall not be und u ly discrimina- 

24 tory or unjust against the service or charges in any othe r 

25 State arising from the use of the power from the same 



13 

1 project, and such facts shall be established to the satisfaction 

2 o f the Secretary of War, then in such case the provisions of 

3 this section shall not apply to the rates, charges, and service 

4 in and for such State. 

5 " That, except u p on the written consent of the Secretary 

6 of War, no sale or delivery of power shall be made to a riis- 

7 tributing company, except in case of an emergency . 

8 " The Secretary of War shall have the right to provide 

9 rules and regulations for uniform accounting, to examine all 

10 books and accounts of grante e s under the terms of this Act; 

11 to r e quire them to submit statements, repres e ntations, or 

12 r eports, annual or s pe cial, including full inf o rmation as to 

13 assets and liabiliti e s, capitalization, cost of project, cost of 

14 operation, the production, us e , tran s mission and sale of 

15 power. — All such statements, representations — a^d — reports 

16 shall b e upon oath un le ss oth e rwis e specified, and in such 

17 form and o n such blanks as the Secretary of War may 

18 r equire, and any person making any false entry, statement, 

19 re presentation or report under oath shall be subject to pun- 

20 ishment as for perjury. 

21 " Sec. 12. That the grantee shall commence the con- 

22 st ruction of the dam and accessory works w T ithin one year 

23 from the elate of the approval herein provided, and shall 

24 thereaft e r, in good faith and with due dilig e nc e , prosecute 

25 such construc ti on, and shall, within the further term of three 



14 

1 years, complete the dam and afterwards shall, within such 

2 t imes as the Secretary of War and the Chief of Engineers 

3 s hall prescribe, put in commercial operation such part of the 

4 ultimate development as the Secretary of War and the Chief 

5 of Engineers shall deem necessary to supply the reasonable 

6 n e eds of the then available marke t , and shall, from time to 

7 ti me thereafter, construct such portion of the balance of such 

8 ultimate development as said Secretary of War and Chief of 

9 Engineers may direct and within the time specified by said 

10 Secretary of War and Chief o f Engine er s so as to supply 

11 adequately t he reasonable m arket d ema n d s u n ti l such nlti- 

12 m at e d evelopment shall be c o m pleted ; and extensions of the 

13 periods herpin specified, not to exceed two years, may be 

14 grant e d by the Secretary o f War, on recommendation of the 

15 Chief of Engineers, when, in his judgment, the public interest 

16 will be promoted thereby. — In case t h e grantee shall not 

17 c ommence actual construction within the time herein pre 

18 scribed, or as extended by th e Secretary of War, then the 

19 authority as to such grantee shall terminate, and in case any 

20 d am and acc e ssory works be not completed within the tim e 

21 herein specified or extended as herein provided, then the At- 

22 torncy General, upon the request of the Secretary of War, 

23 shall institute proper proceedings in the proper district court 

24 of the Unit e d States for the revocation of said authority, the 

25 sale of the works constructed, and such other equitable r e lief 



15 

1 as th e case may demand, as provid e d for in section seven of 

2 this Act. 

3 "Sec. 13. That the right to alter, amend, or repeal this 

4 Act is h e r e b y e xpr e ssly r e served as to any and a l l dams 

5 which may b e authoriz e d in accordance with the provisions 

6 o f this Act . — In such case the United States shall incur 

7 n o liability for the alteration, amendment, or repeal thereof 

8 t o the owner or owners or any other persons interested in 

9 such dam. 

10 "Seg, — 14 — That the Secretary of War be, and he is 

11 hereby, authoriz e d to en te r into leases for the use of surplus 

12 water and water power generated at dams and works c on- 

13 s true ted wholly or in part by the United States in the inter- 

14 ests of navigation at such rates, on such terms and con- 

15 ditions, a nd for s uch periods o f ti me n ot t o exceed fifty years, 

16 and with such provision for the periodical readjustment of 

17 rentals as may seem to him just, equitable, and expedient, 

18 subject, however, to the provisions of this Act governing 

19 t he authorization, maintenance, and operation of power 

20 plants and to all regulations governing the use and dispo- 

21 s ition of t he p ower, so far as the same m ay be applicable; 

22 and all such leases, t h e parties thereto, and the terms and 

23 c onditions thereof, shall be rep o rted annually to Congress: 

24 Provided, That said Secretary o f War, in making such l e ases, 



16 

1 shall give preference to any municipal corporation or other 

2 public corporation not operated for private profit, 

3 "- Sec. 15. That no rights or privileges granted under 

4 this Act and no works constructed, maintained, and operated 

5 under the provisions of this Act shall be owned, trusteed, 

6 or controlled by any device or in any manner so that they 

7 may form a part of, or in any manner effect, a combination 

8 in the form of an unlawful trust or form the subj e ct of an 

9 u nlawful contra c t or conspiracy to limit the output of electric 

11 of electric ene rgy, o r the ex e rcis e of any other business 

12 contemplated : — JRrovidedrj-h&i vever, That it shall be lawful 

13 under the approv a l of the Secr e tary of War for d iff erent 

14 grantees to exchange and interchange currents, to assist on e 

15 another whenever necessary, by supplementi n g the current s 

16 or power, and enable any grant e e to secure assistance to 
IT carry on the business and supply his custome rs , accounting 

18 therefor and paying therefor under regulations to be pre - 

19 serihe d by the Secretary of War. 

20 "I n no case shall such an arrangement be permitted 

21 to rais e the pric e , render unjust or unfair any practice, work -, 

22 or discrimination, or operate in restraint of trade . 

23 " If any grantee shall violate the provisions of this 

24 section it shall forfeit all rights and privileges conferred by 

25 this Act. 



17 

1 " Sec. 16. That th e word 'persons' as used in this Ac4 

2 shall be construed to import both the singular and the plural, 

3 as the case demands, and shall include corporations, com - 

4 panics, and associations. — The word 'dam' as used in this 

5 Act shall b e constru e d to import both the singular and plural, 

6 as the case demands . 

7 " Sec. 17. That all of the provisions in sections two , 

8 three, four, five, nine, ten, eleven, and fif t e e n of this Act 

9 fixing conditions of th e consent of Congress and regulating 

10 practices and charges between the grantees and their cus - 

11 tomers for th e construction, maintenance, and operation of 

12 dams in the navigable waters of the United States shall 

13 apply alike to all existing enterprises in operation or pre- 

14 viously authorized in th e navigable waters of the United 

15 S tates in which the approval and supervision of the Secretary 

16 of War and Chief of Engineers are required, as well as to 

17 new projects in the nav i gable waters of the United States 

18 fog- which the consent o f Congress may hereafter be granted , 

19 in the construction, maintenance, and operation of which the 

20 approval and supervision of the Secretary of War and Chief 

21 of Engineers shall be required. — All conflicting provision s 

22 c o ntained in any previous Act of Congress granting cons e nt 

23 for the construction, maint enan c e , and op er ation of any 
21 d am in th e navigabl e waters of the United States in the 

H. R. 16053 3 



18 

1 construction, maintenance, and oper a tion of which the ap- 

2 pr oval and supervision of the Secretary of War and the Chie g 

3 of Engineers were required are hereby repealed, and all 

4 s uch previous authorizations are so altered, amended, and 

5 modified hereby as to conform to all the conditions and pro- 

6 visions in said sections two, th r ee, four, five, nine, ten, 

7 eleven and fifteen of this Act. 

8 "&&G, — 18, — That the provisions of this Act shall not 

9 apply to irrigation or poAver dams or grants to municipal 

10 co r p orations affecting t h e use of w at er or water power for 

11 municipal purpo s es, or other projects under the jurisdiction 

12 of the Secretary of the Interior or the Secretary of Agricul- - 

13 ture upon the public land s of the United States ^" 

14 That the Act entitled "An Act to regulate the construction 

15 of dams across navigable ivaters" approved June twenty- 

16 third, nineteen hundred and ten, be, and the same is hereby, 

17 amended to read as folloivs: 

18 "Section 1. That the consent of Congress is hereby 

19 given to any persons, as hereinafter defined, after obtaining 

20 the permit of the Secretary of War as hereinafter pro- 

21 vided, to construct, maintain, and operate a dam or 

22 dams or diversion structures, and accessory works, for 

23 ivater power or other purposes across, in, or along any of 

24 the navigable ivater s of the United States; and such grantee 

25 and such permit shall at all times be subject to the pro- 



19 

1 visions of this Act and also subject to such conditions as 

2 the Secretary of War shall, in accordance ivith the provisions 

3 of this Act, make a part of such permit. Thai the word 

4 'persons' as used in this Act shall be construed to mean both 

5 the singular and plural as the case demands, and shall also 

6 include States, political subdivisions of States, municipal cor- 

7 porations, corporations, companies, and associations; and the 

8 term 'grantee' herein shall mean any such persons to whom 

9 shall be granted a permit as herein provided: Provided, That 

10 whenever the primary purpose of the grant or permit is to 

11 furnish power for a public-utility purpose the grantee must 

12 be a State, or a municipal corporation, or a political 

13 subdivision of a State, or a public-service agent of a 

14 State, or a public-utility corporation organized and consti- 

15 tuted under the laws of a State or the United States, author- 
ity ized to engage in the business of furnishing water, heat, 

17 or electric energy for public or private use, and whose 

18 rates and charges and service shall be subject to regulation 

19 by a duly constituted commission or other agency of said 

20 State or States; but in any case where any State has not 

21 made provision for authorizing municipal corporations, po- 

22 litical subdivisions of the State, or public-utility corporations 

23 or agencies to engage in said business or has not provided for 

24 regulating their rates, charges, and service, the qualifications 

25 of the grantee prescribed in this proviso shall not apply, 



20 

1 and in such cases the grantee shall have the qualifications 

2 prescribed elsewhere in this section, and the rates, charges, 

3 and service of such grantee shall be subject to regulation by 

4 the Secretary of War, as provided in section seven of this 

5 Act; and no transfer of any such permit or of the rights there- 

6 under granted, except by trust deed or mortgage issued for 

7 the bona fide purpose of financing the business of such 

8 grantee, shall be made by any grantee, toithout the approval 

9 of the Secretary of War, to any transferee not having the 

10 qualifications herein specified for a grantee hereunder, and 

11 any successor or assign of the rights of any such grantee, 

12 whether by voluntary transfer, judicial sale, or foreclosure 

13 sale or otherwise, shall be subject to all the conditions of the 

14 permit tender which such rights are held by such grantee, and 

15 also subject to all the provisions and conditions of this Act to 

16 the same extent as though such successor or assign were the 

17 grantee hereunder. 

18 "Bee. 2. That the Secretary of War may grant a per- 

19 mit or permits for such dam or dams and accessory ivorks 

20 upon the folloiving conditions : 

21 "First. The plans and specifications for such dam and 

22 all accessory works, together with such drawings of the 

23 proposed construction and such maps of the proposed loca- 

24 tion as may be required for a full understanding of the sub- 

25 ject, shall be submitted to the Secretary of War and the 



21 

1 Chief of Engineers, and token approved shall be made a 

2 part of such permit; and thereafter no change in such plans 

3 or specifications shall be made except as such change shall 

4 be approved and made a part of such permit by the Secre- 

5 tary of War and the Chief of Engineers. 

6 "Second. The plans, specifications, and location for 

7 any dam shall be such as in the judgment of the Secretary 

8 of War shall be best adapted to a comprehensive plan for 

9 the improvement of the watenvay in question for the uses of 

10 navigation and for the full development of its water power 

11 and for other beneficial public purposes, and best adapted 

12 to conserve and utilize, in the interests of navigation and 

13 water developments, the water resources of the region. 

14 "Third. As part of the conditions of such permit the 

15 Secretary of War may, in so far as he deems the same 

16 reasonably necessary to promote the present and future 

17 interests of navigation and consistent with a reasonable in- 

18 vestment cost to such grantee, make any or all of the f ol- 
id lowing requirements: (a) That such grantee shall, to the 

20 extent necessary to preserve navigation facilities at least 

21 equivalent to those existing prior to the construction of 

22 such dam, construct, in whole or in part, without ex- 

23 pense to the United States, in connection with any such dam, 

24 a lock or locks, booms, sluices, or other structures for 

25 navigation purposes, in accordance with plans, specifica- 



22 

1 tions and conditions approved by the Secretary of 

2 War and made a part of such permit; (b) that such 

3 grantee shall furnish free of cost power for the operation of 

4 the same; (c) that in case such navigation facilities shall 

5 not be made a part of such original construction at the 

6 expense of the grantee, then, tohenever the United States 

7 shall deem such navigation facilities necessary, the grantee 

8 shall convey to the United States, free of cost, such of its land 

9 and its right of way and permit such control of pools as may 

10 be required for such navigation facilities, and shall furnish 

11 free of cost power for the operation of the same; (d) that 

12 such grantee shall reimburse the United States for the cost of 

13 any investigation necessary for the approval of the plans as 

14 herein provided and for such supervision of construction as 

15 may be necessary in the interest of the United States; (e) that 

16 such grantee shall pay to the United States reasonable charges 

17 in consideration of the benefits accruing to and used by such 

18 grantee through the construction, operation and maintenance 

19 by the United States of headwater improvements, includ- 

20 ing storage reservoirs, on any such stream, such charges to 

21 be fixed from time to time by the Secretary of War and to, 

22 be based upon a reasonable compensation proportionate to the 

23 benefit actually received by the grantee by reason of any in- 

24 crease of floiv past or over the toater-power structures arti- 

25 ficially caused by such headwater improvement; and all 



23 

1 moneys received from such charges are hereby reserved and 

2 appropriated as a special fund in the Treasury to be known 

3 as 'The headwater improvement fund/ from ivhich fund ex- 

4 penditures for headwater improvements and maintenance may 

5 be made by and in the discretion of the Secretary of War; (f) 

6 that such grantee in the construction, maintenance, and opera- 

7 tion of such dam or diversion structure and accessory works 

8 may, with the authority of the Secretary of War, occupy 

9 and use, to the extent necessary for the project, any lands 

10 of the United States, including the public lands; and any part 

11 of the public lands may, on certification by the Secretary 

12 of War that the same is required for navigation purposes; 

13 be withdraivn by the President for said purpose as provided 

14 in the Act entitled 'An Act to authorize the President of the 

15 United States to make tvithdrawal of public lands in certain 

16 cases, approved June twenty -fifth, nineteen hundred and 
IT ten/ and for any land of the United States so used and oc- 

18 cupied the grantee shall pay to the United States such 

19 reasonable charges as may be fixed by the Secretary of War; 

20 and in fixing such charges consideration shall be taken of 

21 the benefits accruing from the use and occupation of such 

22 lands to the interests of navigation, as tvell as to the business 

23 of said grantee. 

24 "In firing such conditions, or any of them, the Secre- 

25 tary of War shall also take into consideration the 

(10) 



24 

1 probable cost to such grantee of construction and 

2 maintenance and operation and the probable consumers' 

3 rate required to produce a reasonable return upon 

4 the investment required of such grantee. As bettveen 

5 contesting applicants for a permit hereunder having the 

6 legal qualifications required by this Act, preference shall 

7 be given to that applicant which is best qualified to expedite 

8 and realize the maximum useful development of all the water 

9 resources of the region; and as between such contesting ap- 

10 plicants which appear equally well qualified in such respect, 

11 then preference shall be given to that applicant ivhich has 

12 first complied with the laws of the State or States in ivhich 

13 the dam or diversion structure is to be constructed. In grant- 

14 ing permits hereunder and fixing conditions thereof, and in 

15 prescribing rules and regulations as to the maintenance and 

16 operation of any structure to which this Act is applicable, 

17 the Secretary of War, before acting, shall have the report 

18 and advice of the Chief of Engineers. 

19 "Sec. 3. That the control of the level of the pools above 

20 and below such dam and of the currents developed therein 

21 and of the flow of the water over and past such dam 

22 and the operation of navigation facilities ivhich shall be 

23 constructed as a part of or in connection with any such dam, 

24 whether at the expense of such grantee or of the United 

25 States, shall at all times be subject to such rules and regula- 



25 

1 tions as shall be deemed by the Secretary of War to be 

2 reasonable and necessary in the interests of navigation. Such 

3 rules and regulations may include the maintenance and 

4 operation by such grantee, at its own expense, of such lights 

5 and other signals as may be directed by the Secretary of War 

6 and such other lights and signals and such fishivays as may 

7 be prescribed by the Secretary of Commerce, and for failure 

8 to comply ivith any such rule or regulation such grantee shall 

9 be deemed guilty of a misdemeanor, and upon conviction 

10 thereof shall be punished as provided in section eight of 

11 this Act. 

12 u Sec. If. That any such permit shall not have the effect 

13 to relieve the grantee from liability for any damage occa- 

14 sioned to the property of others by the construction, main- 

15 tenance, or operation of any dam or of the works appurte- 

16 nant or accessory thereto, and the United States shall in no 

17 event be liable therefor. When grantee under the provisions 

18 of this Act is a State, municipal corporation, or a political 

19 subdivision of a State, or a public- service agent of a State, 

20 or a public utility or service corporation, it may acquire 

21 the right to use or damage any lands or property of others 

22 necessary to the construction, maintenance, or operation of 

23 any such dam or diversion structure or of the works appurte- 

H. K. 16053 4 



26 

1 nant or accessory thereto by the exercise of the right of emi- 

2 nent domain either under the laws of the State in which such 

3 lands or property are located, or, in case such flight can not 

4 be acquired under the laws of such State, then under the 

5 laivs of the United States providing for the acquirement by 

6 condemnation of lands or property for the uses of navigation. 

7 "Sec. 5. That unless revoked for cause as provided in 

8 section eight of this Act the rights under any such permit shall 

9 continue for a period of fifty years from and after the date 

10 of the completing and putting into commercial operation of 

11 the initial installation required by the Secretary of War, 

12 as provided in section nine of this Act, and after the expira- 

13 tion of said fifty years such rights shall continue until re- 

14 vol:ed for cause as provided in section eight of this Act or 

15 until terminated and compensation has been made to such 

16 grantee for its property as provided in section six of this Act. 

17 "Sec. 6. That at any time after the expiration of said 

18 fifty years the United States may terminate the rights here- 

19 under granted upon the giving to the grantee of one year's 

20 notice in writing of such termination, and upon the taking 

21 over by the United States of all of the property of the grantee 

22 dependent in whole or in part for its usefulness upon the 

23 rights hereunder granted, which are necessary and appur- 

24 tenant, or acquired and valuable or serviceable in the dis- 

25 tribution of ivater, or in the generation, transmission, and 



27 

1 distribution of power, and upon paying to the grantee the fair 

2 value of said property, together ivith the cost to the grantee 

3 of the lock or locks, or other aids to navigation, and all other 

4 capital expenditures required by the United States, and 

5 assuming all contracts entered into by the grantee prior to the 

6 receipt by it of said notice of termination which have the 

7 approval of the duly constituted public authority having 

8 jurisdiction thereof, or which were entered into in good faith 

9 and at a reasonable rate, in view of all the circumstances 

10 existing at the time such contracts were made. The fair 

11 value of said property and the reasonableness and good faith 

12 of such contracts shall be determined by agreement betiveen 

13 the Secretary of War and the grantee, and in the event of 

14 their failure to reach unanimous agreement, then by pro- 

15 ceedings in equity instituted by the United States in the 

16 district court of the United States in the district within which 

17 any portion of such dam may be located. In the determina- 

18 tion of the value of said property for any purpose as between 

19 such grantee and the United States or any State no value 

20 shall be claimed by or allowed to the grantee for the rights 

21 hereunder granted. 

22 "Sec. 7. That whenever all or any part of the power 

23 produced at any dam or diversion structure authorized here- 

24 under is offered or disposed of by the grantee to the public, or 

25 for a public utility purpose, all charges, rates, and service by 



28 

1 any such grantee shall he reasonable, adequate, and without 

2 discrimination, and shall be subject to regulation in accord- 

3 ance ivith the laws of the State icithin lohich the service is 

4 rendered: Provided, That whenever in case any State fails 

5 to provide such laws for the regulation of such charges, rates 

6 and service, the Secretary of War shall be of the opinion, 

7 upon complaint made and full hearing thereon, that the rates 

8 or charges demanded or collected and the service rendered by 

9 any person or corporation to the public are unreasonable, 

10 inadequate, or unduly discriminatory, he is hereby authorized 

11 and empowered from time to time to determine and prescribe 

12 what shall be the just and reasonable rates and charges to be 

13 observed as the maximum to be charged and the service to be 

14 rendered; and in case of the violation of any such order of 

15 the Secretary of War, the provisions of this Act relative to 

16 forfeiture shall apply: Provided further, That where the said 

17 power or any part of it shall enter into interstate or foreign 

18 commerce, Congress may, by proper legislation, regulate the 

19 rates, charges, and services made and rendered, so as to be 

20 fair and reasonable to the grantee and the public: And pro- 

21 vided further, That in the valuation for rate-making purposes 

22 of the property of any such grantee there shall be included the 

23 cost to such grantee of the construction of the lock or locks, or 

24 other aids to navigation, and all other capital expenditures re- 

25 quired by the United States, but no value shall be claimed or 



29 

1 allowed for the rights hereby granted: And provided further, 

2 That nothing in this Act shall be construed to prevent any 

3 State in which such dam ivith its appurtenant property is 

4 located, or in which such business is to be conducted, from 

5 making and enforcing any lawful regulations, including the 
(> levying of taxes, with respect to the property or business of 

7 such grantee. 

8 "Sec. 8. That any grantee who shall fail or refuse to 

9 comply ivith any of the provisions of this Act or any of 

10 the conditions made a part of any permit issued hereunder 

11 or any regulation or lawful order of the Secretary of War, 

12 made in accordance ivith the provisions of this Act, shall 

13 be deemed guilty of a misdemeanor, and on conviction 

14 thereof shall be punished by a fine not exceeding $1,000, 

15 in addition to other penalties herein prescribed or provided 

16 by law, and every month such grantee shall remain in 

17 default shall be deemed a new offense and subject such 

18 grantee to additional penalties therefor; and in addition 

19 to said penalties the Attorney General may, on request of 

20 the Secretary of War, institute proper proceedings in equity 

21 in the district court of the United States in the district in 

22 which such structure or any of its accessory works are, 

23 in whole or in part, situated, for the purpose of having such 

24 violation stopped by injunction, mandamus, or other process; 

25 and any such district court shall have jurisdiction over all 



30 

1 such proceedings and shall have the power to make and 

2 enforce all writs, orders, and decrees necessary to compel the 

3 compliance with the lawful orders and regulations of the Sec- 

4 retary of War and the performance of any condition imposed 

5 under the provisions of this Act; and if the unlawful main- 

6 tenance and operation be deemed by the court to be such as 

7 shall require, in the public interest, a decree revoking all 

8 rights and privileges held under authority of this Act, the 

9 court may decree such revocation, and in case of such a 

10 decree the court may wind up the business of such grantee 

11 conducted under the rights in question and may decree the 

12 sale of the dam or diversion structure and all appurtenant 

13 property constructed or acquired under authority of this 

14 Act, and distribute the proceeds to the parties entitled to the 

15 same, and may make and enforce such other and further 

16 orders and decrees as equity and justice may require; and in 

17 case of such sale the vendee shall take the rights and privileges 

18 and shall perform the duties which belonged to the grantee, 

19 and shall assume all outstanding obligations and liabilities of 

20 the grantee which the court may deem equitable in the prem- 

21 ises; and in case no purchaser be found the court shall, by 

22 the appointment of a receiver or otherwise, exercise all juris- 

23 diction necessary for the protection and administration or 

24 disposition of the property and for the equitable execution 

25 of this Act. 



31 

1 "Sec. 9. That the grantee shall commence the con- 

2 struction of the dam and accessory ivorks within two years 

3 from the date of the permit herein provided, and shall there- 

4 after, in good faith and with due diligence, prosecute such 

5 construction, and shall, within the further term of five years, 

6 complete and put in commercial operation such part of the 

7 ultimate development as the Secretary of War shall deem 

8 necessary to supply the reasonable needs of the then available 

9 market, and shall, from time to time thereafter, construct 

10 such portion of the balance of such ultimate development as 

11 said Secretary of War may direct and within the time 

12 specified so as to supply adequately the reasonable mar- 
is Let demands until such ultimate development shall be com- 

14 pleted; and extensions of the periods herein specified 

15 may be granted by the Secretary of War when, in his 

16 judgment, the public interest ivill be promoted thereby. In 

17 case the grantee shall not commence actual construction 

18 tcithin the time herein prescribed, or as extended by the 

19 Secretary of War, then the authority as to such grantee shall 

20 terminate, and in case any dam or diversion structure and 

21 accessory works be not completed ivithin the time herein specl- 

22 fied or extended as herein provided, then the Attorney General, 

23 upon the request of the Secretary of War, shall institute 

24 proper proceedings in the proper district court of the United 

25 States for the revocation of said authority, the sale of the 



32 

1 toorks constructed, and such other equitable relief as the case 

2 may demand, as provided for in section eight of this Act. 

3 "Sec. 10. The Secretary of War may lease to any 

4 applicant having the capacity of grantee as herein defined, 

5 who has acquired and owns the right to use the water for 

6 power and other purposes under the laios of the State in 

7 which a dam is constructed or to be constructed, by the United 

8 States, the right to utilize the surplus ivater over and above 

9 that required for navigation at any navigation dam now or 

10 hereafter constructed, either with or without contribution by 

11 the applicant, and oivned by the United States, and on such 

12 terms as may be deemed by the Secretary of War for the 

13 best interests of the United States, and reasonable and fair 

14 to both parties, and in awarding such lease preference shall 

15 be given by the applicant ivhose plans are deemed by the Sec- 

16 retary of War to be best adapted to conserve and utilize in 

17 the public interest the navigation and water resources of the 

18 region, and all such leases and the parties thereto and the 

19 terms and conditions thereof shall be reported annually to 

20 Congress. The charges and rents arising from such lease or 

21 leases are hereby reserved and appropriated as a special fund 

22 in the Treasury to be expended for the maintenance of said 

23 dams and the further improvement of the ivaterivay in which 

24 the same may be situated under the direction of the Secretary 

25 of War. 



33 

1 "Sec. 11. That this Act shall not affect the rights of any 

2 person, company, or corporation as to the construction, main- 

3 tenance, or operation of any structures heretofore constructed 

4 or upon which construction has been begun, under permit or 

5 approval of the Secretary of War and Chief of Engineers or 

6 other authority heretofore lawfully granted: Provided, That 

7 in the operation of any such structures and accessory ivories 

8 the provisions of sections three, seven, eight, twelve, and thir- 

9 teen of this Act shall apply to the same extent as if such struc- 

10 tures had been authorized under this Act, and all conflicting 

11 provisions relating to the operation of said structures and 

12 accessory works contained in any authority heretofore law- 

13 fully granted are hereby altered, amended, or repealed so 

14 as to conform with the provisions of said sections three, 

15 seven, eight, twelve, and thirteen of this Act: And provided 

16 further, That upon application by any person, company, or 

17 corporation having the capacity of grantee as herein defined, 

18 which is now constructing or operating any structures herein 

19 specified, across, in, or along any navigable waters of the 

20 United States under authority heretofore lawfully granted, 

21 the Secretary of War may issue to such applicant a permit in 

22 accordance with the provisions of this Act, and in such a 

23 case the provisions of this Act shall become extended to such 

24 applicant as a grantee hereunder: Provided further, That the 

H. K. 16053 5 



34 

1 provisions of this Act shall not apply to irrigation or power 

2 dams or grants to municipal corporations affecting the use 

3 of water or water power for municipal purposes or to other 

4 projects under the jurisdiction of the Secretary of the Interior 

5 or the Secretary of Agriculture, upon the public lands of the 

6 United States. 

7 "Sec. 12. That the ivories constructed and maintained 

8 under authority of this Act shall not be owned, leased, 

9 trusteed, possessed, controlled, or operated by any device or 

10 in any manner so that they form part of or in any way effect 

11 any combination in the form of an unlawful trust or mo- 

12 nopoly, or form the subject of any unlawful contract or con- 

13 spiracy to limit the output of electric energy or in restraint 

14 of trade with foreign nations or between two or more States 

15 or Territories, or within any one State or Territory, in the 

16 generation, sale, or distribution of electric energy. 

17 (( Sec. IS. That the right to alter, amend, or repeal this 

18 Act is hereby expressly reserved: Provided, That in case any 

19 grantee hereunder shall, at the time of such alteration, 

20 amendment, or repeal, have exercised rights in accordance 

21 with this Act, such rights and the property used thereunder 

22 shall be deemed property rights of such grantee, of which 

23 such grantee shall not, until the time herein fixed for termi- 

24 nation, be deprived by such alteration, amendment, or re- 



35 

1 peal, and then only upon the conditions provided in case of 

2 termination by section six of this Act/ 7 

Passed the House of Representatives August 4, 1914. 
Attest : SOUTH TRIMBLE, 

Clerk. 
By D. K. HEMPSTEAD, 

Enrolling Clerk. 



APPENDIX D 



Calendar No. 786 

3d Session. 



63d CONGRESS, ww q jaawo 



[Report No. 898.] 

IN THE SENATE OF THE UNITED STATES. 

August 25, 1914. 

Read twice and referred to the Committee on Public Lands. 

January 11, 1915. 

Reported by Mr. Myers, with amendments. 

[Omit the part struck through and insert the part printed in italic] 



AN ACT 

To provide for the development of water power and the use of 
public lands in relation thereto, and for other purposes. 

1 Be it enacted by the Senate and House- of Representa- 

2 tives of the United States of America in Congress assembled, 

3 That the Secretary of the Interior be, and hereby is, author- 

4 ized and empowered directed, under general regulations to be 

5 fixed by him, and under such terms and conditions as he may 

6 prescribe, not inconsistent with the terms of this Act, to lease 

7 to citizens of the United States, or to any association of isuch 

8 persons, or to any corporation organized under the laws of the 

9 United States, or any State or Territory thereof, any part 
10 of the public lands of the United States (including Alaska), 



2 

1 reserved or unreserved, including lands in national forests, 

2 the Grand Canyon and Mount Olympus national monu- 

3 inents, and other reservations, not including national parks 

4 or military reservations, for a period not longer than fifty 

5 years of fifty years unless the applicant and the Secretary of 

6 the Interior agree on a shorter period as the applicant for lease 

7 may elect, for the purpose of constructing, maintaining and 

8 operating dams, water conduits, reservoirs, power houses, 

9 transmission lines, and other works necessary or convenient 

10 to the development, generation, transmission, and utilization 

11 of hydroelectric power, which leases shall be irrevocable ex- 

12 cept as herein provided, but which may be declared null and 

13 void upon breach of any of their terms : Provided, That such 

14 leases shall be given within or through any of said national 

15 forests or other reservations only upon a finding by the chief 

16 officer of the department under whose supervision such forest, 

17 national monument, or reservation falls that the lease will 

18 not injure, destroy, or be inconsistent with the purpose for 

19 which such forest, national monument, or reservation was 

20 created or acquired: Provided further, that in the granting 

21 of leases under this Act the Secretary of the Interior may, 

22 in his discretion, give preference to applications for leases for 

23 the development of electrical power by States, counties, or 

24 municipalities, or for municipal uses and purposes : Provided 

25 further, That for the purpose of enabling applicants for a 



3 

1 lease to secure the data required in connection therewith, the 

2 Secretary of the Interior may, under general regulations to 

3 be issued by him, grant preliminary permits authorizing the 

4 occupation of lands valuable for water-power development 

5 for a period not exceeding one year in any case, which time 

6 may, however, upon application, be extended by the Secre- 

7 tary of the Interior if the completion of the application for 

8 lease has been prevented by unusual weather conditions or 

9 by some special or peculiar cause beyond the control of the 

10 permittee : Provided, That no lease shall he granted until the 

11 applicant has the right from the State or States wherein said 

12 project is to be located, to sufficient water to develop or gen- 

13 erate the electrical energy intended to be generated by appli- 

14 cant's proposed project. 

15 Sec. 2. That each lease made in pursuance of this Act 

16 shall provide for the diligent, orderly, and reasonable devel- 

17 opment and continuous operation of the water power, subject 

18 to market conditions, and shall provide that the lessee shall 

19 at no time contract for the delivery to any one consumer of 

20 el ectrical energy in excess of fifty per centum of the total 

21 output. 

22 Sec. 3. That in case of the development, generation, 

23 transmission, and- or use of power or energy under such a lease 

24 in a Territory, or in two or more States, the regulation and 

25 control of service and of charges for service to consumers and 

(ii) 



4 

1 of the issuance of stock and bonds by the lessee is hereby 

2 conferred upon the Secretary of the Interior or committed t o 

3 s uch body as may be provided by Federal statut e Interstate 

4 Commerce Commission: Provided, That the physical combi- 

5 nation of plants or lines for the generation, distribution, and 

6 use of power or energy under this Act or under leases given 

7 hereunder not in violation of law may be permitted, in 

8 the discretion of the Secretary of the Interior, but c o mbina - 

9 tions, agreements, — arrangements, — or — un d e rstan di ng s, — ex- 

10 press or implied, to limit th e output of electrical energy, 

11 to restrain trade with foreign nations o r b e tw e en two or 

12 mor e Stat e s or within any o ne State, or to fix, maintain, or 

13 increase pric e s for electrical energy or service arc hereby 

14 forbidden. 

15 Sec. 4. That except upon the written consent of th e 

16 Secretary of th e Interior no sale or delivery of power shall 

17 be made to a distributing company, except in case of an 

18 emergency and then only for a period not exceeding thirty 

19 days, nor shall any lease issued under this Act be assignabl e 

20 or transferable without such written consent : Provided, how - 

21 ever-, That no lessee under this Act shall create any lien 

22 upon any power proj e ct the land leased nor upon any power 

23 project within a Territory, or intended for use in the genera- 

24 tion and transmission of water power or energy in two or 

25 more States and developed under a permit issued under this 



5 

1 Act by mortgage or trust deed, except approved by the 

2 Secretary of the Interio r Interstate Commerce Commission 

3 and for the bona fide purpose of financing the business of the 

4 lessee construction or operation of said project. Any succes- 

5 sor or assign of such property or project, whether by volun- 

6 tary transfer, judicial sale, foreclosure sale, or otherwise, shall 

7 be subject to all the conditions of the approval under Avhich 

8 such rights are held, and also subject to all the provisions 

9 and conditions of this Act to the same extent as though such 

10 successor or assign were the original lessee hereunder. 

11 Sec. 5. J £ha^ttpo u not less than three years' notic e, 

12 which may be issued at any time after three years immedi - 

13 ately pri o r to t he expi r at io n of a ny lease under this Act, the 

14 United States shall ha ve th e right to take over the propertie s 

15 w hi c h are depende nt, i n whole or in part, for their useful - 

16 rt ess on the con t inuance of the lease herein — provided for , 

17 a nd w h ich may have been acquired by any lessee acting 

18 un der the pr ovisions of this Act, upon condition that it shal l 

19 p ay, before taking possession, first, the actual costs of rights 

20 of way, water rights, lands, and interests therein purchased 

21 and- used by the lessee in the generation and distribution of 

22 electr ical energy under the lease , and, second, the reasonable 

24 tures and fixtures acquired, erected, or placed upon the lands 

25 and included in the generation or dist r ibution plant, and 



6 

1 which are dependent as hereinabove set forth , such reaso n- - 

2 a ble value to be determined by mutual agreement between 

3 t he Secretary of the Interi o r an d t he lessee, and, in case 

4 t hey can not agree, by proceedings instituted in the United 

5 S tates district court for that purpose: Provided, That suc h 

6 r easonable value shall not include or be affected by the 

7 v alue of the franchise or good will or profit s t o b e ea rned- 

8 o n pending contracts or any other intangible element. That 

9 upon not less than three years' notice, which may be issued 

10 at any time after three years immediately prior to the ex- 

11 piration of any lease under this Act, the United States shall 

12 have the right to take over all the properties which are de- 

13 pendent in whole or in part for their usefulness on the con- 

14 tinuance of the lease herein provided for, which may have 

15 been acquired by any lessee under the provisions of this 

16 Act, or the right to take over, upon mutual agreement with 

17 the lessee, a severable and complete unit of any such power 

18 system, upon condition that it shall pay in a lawful warrant 

19 drawn on the Treasury of the United States, or otherwise, be- 

20 fore taking possession the fair value of such property, such 

21 value to be determined by mutual agreement between the Sec- 

22 retary of the Interior and the lessee, and, in case they can not 

23 agree, by proceedings instituted in the United States district 

24 court for that purpose: Provided, That snch fair value shall 

25 not include or be affected by the value of any public lands, 

26 rights of ivay, or other property leased or granted under this 



1 Act by the United States or by the value of the franchise, good 

2 will, value as a going concern, future profits from pending 

3 contracts, or prospective revenues, profits, or dividends. 

4 Sec. 6. That in the event the United States does not 

5 exercise its right to take over, maintain, and operate the 

6 properties as provided in section five hereof, or does not 

7 renew the lease to the original lessee npon snch terms and 

8 conditions and for snch periods as may be authorized under 

9 the then existing applicable laws, the Secretary of the Inte- 

10 rior is authorized, upon the expiration of any lease under 

11 this Act, to lease the properties of the original lessee to a 

12 new lessee upon such terms, under such conditions, and 

13 for such periods as applicable laws may then authorize, and 
11 upon the further condition that the new lessee shall pay for 

15 the properties as provided in section five of this Act. In 

16 the event the United States does not exercise its right to take 
IT over the properties, as provided in section five, and a renewal 

18 of the lease to the original lessee is not made, and- no lease is 

19 made of the properties to a new lessee, then the lease at the 

20 option of the lessee shall continue in existence upon the terms 

21 and conditions in force at the time fixed for its expiration 

22 until such time as the property is tal<en over by the United 

23 States, as provided in section five, or by a new lessee, as 

24 provided in section six, or the lease is renewed: Provided, 

25 That the original lessee shall have a preference right to 



8 

1 renewal over and above any new lessee upon such terms 

2 and conditions as the law and regulations then in force shall 

3 authorize. 

4 Sec. 7. That where, in the judgment of the Secretar y 

5 of- t he Interior, the public interest requires or justifies the 

6 e xecution by any lessee of contracts for the sale and delivery 

7 o f electr i cal energy for periods extending bey o nd the lif e 

8 o f the lease, but for not more than twenty year s thereaft er, 

9 s uch contracts may be ente re d into upon the approval of 

10 th e said Secretary, and thereafter, in the event of the exer - 

11 c ise by the United States of the option to take over the plant 

12 in the manner provided in sections five or six hereof, the 

13 United States or its new lessee shall assume and fulfill all 

14 s uch contracts entered into by the first lessee That where 

15 the public interest requires or justifies the execution by the 

16 lessee of contracts for the sale and delivery of electrical energy 

17 for periods extending not to exceed twenty-five years beyond 

18 the fifty-year period herein named, such contracts may be 

19 entered into upon the approval of the Public Service Com- 

20 mission or similar authority in the State in which the sale or 

21 delivery of power is made, and upon the approval of the 

22 Secretary of the Interior of the United States; or if sold or 

23 delivered in a Territory or in a State without a regulating 

24 authority, then upon the approval of the Secretary of the 

25 Interior; and thereafter, in the event of the termination of the 



9 

1 lease as herein provided, the United States or any subsequent 

2 lessee shall assume and fulfill all such contracts entered into 

3 by the original lessee. 

4 Sec. 8. That for th e occupancy and use of lands and 

5 o ther prop e rty of th e United States permitted under this 

6 Act the Secretary of th e Int e rior is authorized to specify in 

7 the lease and to coll e ct charges or rentals — for all power 

8 developed and sold or used by the lesse e for any purpose 

9 o ther than the operation of the plant, and the proceeds shall 

10 be paid into, reserved, and appropriat e d as a part of the 

11 r eclamation fund created by the Act of Congress approved 

12 June seventeenth, nineteen hundred and two, known as 

13 t he reclamation Act, and after use thereof in the construction 

14 o f reclamation works and upon return to the reclamation 

15 f und of any such moneys in the manner provided by the rcc 

16 l amation Act an d Acts amendatory thereof and supple 

17 mental th e r e to, fifty p e r centum of the amounts so utilized in 

18 and return ed to the r e clamation fund shall be paid by the 

19 Se c retary of the Tr e asury aft e r the expiration of each fiscal 

20 ye ar to the State within the boundaries of which the hydro - 

21 e lectric p o wer or energy is generated and developed, said 

22 moneys to be used by such State for the support of public 

23 s chools or other edu c a ti onal institutions or for the construc - 

24 t- ion of public improvements, or both, as the legislatur e of the 

H. B. 16673 2 



10 

1 State may direct : Provided, That leases for the develop - 

2 merit of power by municipal corporations solely for munici - 

3 pal use shall be issued without rental charge, and that leases 

4 for development of power not in excess of twenty-five horse 

5 power may be issued to individuals or associations for d o- 

6 mestic, mining or irrigation use without such charge. That 

7 for the occupancy and use of lands and other property of the 

8 United States permitted under this Act, the Secretary of the 

9 Interior is authorized to specify in the lease and to collect 

10 charges or rentals for all land leased, which charges or 

11 rentals may in the discretion of the Secretary be measured 

12 by the power developed and sold or used by the lessee for 

13 any purpose other than the operation of the plant, and of 

14 the proceeds fifty per centum thereof shall be paid by the 

15 Secretary of the Treasury after the expiration of each fiscal 

16 year to the State within which the hydroelectric energy is 

17 generated and developed. The remaining fifty per centum 

18 shall be paid into, reserved, and appropriated as a part of the 

19 reclamation fund created by the Act of Congress approved 

20 June seventeenth, nineteen hundred and two, known as the 

21 reclamation Act: Provided, That if leases shall be made of 

22 lands within Indian reservations the proceeds of charges or 

23 rentals of lands leased which are situated within Indian 

24 reservations shall be placed in the Treasury of the United 

25 States to the credit of the Indians of the reservation in which 



11 

1 the lands so leased are situated: Provided further, That 

2 leases for the development of power by municipal corpora- 

3 tions for municipal use shall be issued without rental charge 

4 and that leases for development of power not in excess of 

5 twenty-five horsepower may be issued to individuals or asso- 

6 ciations for domestic, mining, or irrigation use without 

7 charge. 

8 Sec. 9. That in case of the development, generation, 

9 transmission, or nse of power or energy under a lease given 

10 under this Act in a State which has not provided a commis- 

11 sion or other authority having power to regulate rates and 

12 service of electrical energy and the issuance of stock and 

13 bonds by public-utility corporations engaged in power 
11 development, transmission, and distribution, the control of 

15 service and of charges for service to consumers and stock 

16 and bond issues shall be vested in the Secretary of the 
IT Interior or committed to such body as may be authorized by 

18 Federal statute until such time as the State shall provide a 

19 commission or other authority for such regulation and control. 

20 Sec. 10. That where the Secretary of the Interior 

21 shall determine that the value of any lands, heretofore or 

22 hereafter reserved as water-power sites or for purposes in 

23 connection with water-power development or electrical trans- 
21 mission, will not be materially injured for such purposes by 
25 either location, entry, or disposal, the same may be allowed 



12 

1 under applicable land laws upon the express condition that 

2 all such locations, entries, or other methods of disposal shall 

3 be subject to the sole right of the United States and its 

4 authorized lessees to enter upon, occupy, and use any part 

5 or all of such lands reasonably necessary for the accomplish- 

6 ment of all purposes connected with the development, gen- 

7 eration, transmission, or utilization of power or energy, and 

8 all rights acquired in such lands ishall be subject to a reserva- 

9 tion of such sole right to the United States and its lessees, 

10 which reservation shall be expressed in the patent or other 

11 evidence of title: Provided, That locations, entries, selec- 

12 tions, or filings heretofore allowed for lands reserved as 

13 water-power sites or in connection with water-power devel- 

14 opment or electrical transmission may proceed to approval 

15 or patent under and subject to the limitations and conditions 

16 in this section contained, but nothing herein shall be con- 

17 strued to deny or abridge rights now granted by law to those 

18 seeking to use the public lands for purposes of irrigation or 

19 mining alone. 

20 Sec. 11. That the Secretary of the Interior is hereby 

21 authorized to examine books and accounts of lessees, and to 

22 require them to submit statements, representations, or 

23 reports, including information as to cost of water rights, 

24 lands, easements, and other property acquired, production, 

25 use, distribution, and sale of energy, all of Avhich statements, 



13 

1 representations, or reports so required shall be upon oath, 

2 unless otherwise specified, and in such form and upon such 

3 blanks as the Secretary of the Interior may require; and 

4 any person making any false statement, representation, or 

5 report under oath shall be subject to punishment as for 

6 perjury. 

7 Sec. 12. That any such lease may be forfeited 

8 and canceled, by appropriate proceedings, in a court of 

9 competent jurisdiction whenever the lessee, after reasonable 

10 notice, in writing, as prescribed in the lease, shall fail to 

11 comply with the terms of this Act or with such conditions 

12 not inconsistent herewith as may be specifically recited in the 

13 lease. 

14 Sec. 13. That the Secretary of the Interior is hereby 

15 authorized to perform any and all acts and to make such 

16 rules and regulations as may be necessary and proper for 

17 the purpose of carrying the provisions of this Act into full 

18 force and effect. 

19 Sec. 14. That nothing in this Act shall be construed 

20 as affecting or intended to affect or to in any way interfere 

21 with the laws of any State relating to the control, appro- 

22 priation, use, or distribution of water. 

23 Sec. 15. That all Acts or parts of Acts providing for 

24 the use of the lands of the United States for any of the pur- 

25 poses to which this Act is applicable are hereby repealed 



14 

1 to the extent only of any conflict with this Act : Provided, 

2 however. That the provisions of the Act of February fifteenth, 

3 nineteen hundred and one (Thirty-first Statutes at Large, 

4 page seven hundred and ninety), shall continue in full force 

5 and effect as to lands within the Yosemite, Sequoia, and 

6 General Grant National Parks in the State of California: 

7 And provided further, That the provisions of this Act shall 

8 not be construed as revoking or affecting any permits or 

9 valid, existing rights of way heretofore given or granted pur- 

10 suant to law, but at the option of the permittee any permit 

11 heretofore given for the development, generation, transmis- 

12 sion, or utilization of hydroelectric power may be sur- 

13 rendered and the permittee given a lease for the same prem- 

14 ises under the provisions of this Act. 

15 Sec. 16. That this Act shall not apply to navigation 

16 dams or structures under the jurisdiction of the Secretary 

17 of War or Chief of Engineers, or to lands purchased or 

18 acquired by condemnation by the United States, or with- 

19 drawn by the President under the Act approved June 

20 twenty-fifth, nineteen hundred and ten, entitled "An Act 

21 to authorize the President of the United States to make w T ith- 

22 drawals of public lands in certain cases," where such lands 

23 are purchased, acquired by condemnation, or withdrawn by 

24 the President for the sole purpose of promoting navigation. 



15 

1 Sec. 17. That in instances ivhere only five per centum or 

2 less of the lands actually necessary and required for the con- 

3 str action, maintenance, and operation of dams, water con- 

4 duits, reservoirs, power houses, transmission lines, and other 

5 works for the development, generation, transmission, and 

6 utilization of hydroelectric power in any one proposed sepa- 

7 rate, distinct, and complete plant or project are lands of the 

8 United States Government and such Government lands are 

9 to he used only for overfloivage, reservoir, or transmission 

10 purposes and not in whole or in part as a dam site or the site 

11 of a power house nor for the erection of buildings or opera- 

12 tion of machinery, the Secretary of the Interior may, in his 

13 discretion, lease such lands to an applicant for not more than 

14 fifty years, at such rental price and, upon such terms as he 

15 may deem just, free from all or any other of the terms, con- 

16 ditions, provisions, and requirements of this Act which the 

17 Secretary of the Interior may see fit to waive. 

18 Sec. 18. That authority is hereby conferred upon the 

19 State of Colorado or any citizen or citizens directly interested, 

20 or both, to institute and prosecute an action at law or in 

21 equity against the Secretary of the Interior, or the Gom- 

22 missioner of the General Land Office, or both, to determine 

23 its right and the rights of its citizens to appropriate and 

24 apply to beneficial uses the icaters of the Rio Grande River 

25 and its tributaries within its geographical boundaries. Such 



16 

1 action may be instituted in the district court of the United 

2 States within the State of Colorado, and any judgment or 

3 decree therein shall be subject to review by writ of error or 

4 appeal as provided by law in other cases. 

5 Sec. 19. That authority is hereby conferred upon the 

6 State of Nebraska or any citizen or citizens directly interested, 

7 or both, to institute and prosecute an action at law or in 

8 equity against the Secretary of the Interior or the Director 

9 of the Reclamation Service, or both, to determine its right 

10 and the rights of its citizens in and to the water of the North 

11 Platte River stored by the Pathfinder Dam in the Pathfinder 

12 Reservoir in the State of Wyoming. Such action may be 

13 instituted in the district court of the United States within the 

14 State of "Nebraska, and any judgment or decree therein shall 

15 be subject to review by writ of error or appeal as provided 

16 by law in other cases. 

17 Sec. 20. That the lands leased under this Act may be 

18 used and the toorks constructed, maintained, and operated 

19 thereon may be used, added to, or enlarged by the lessee 

20 or any other person, association, or corporation, for the pur- 

21 pose of impounding and conveying ivater for irrigation, 

22 mining, municipal, domestic, and other beneficial purposes, 

23 lohenever such use of the water is authorized by the State 

24 wherein said project is situated: Provided, hoivever, That 

25 if said lands and works are so used by any other than the 



17 

1 lessee, such use must be without expense or damage to the 

2 said lessee. 

Passed the House of Representatives August 24, 1914. 
Attest : SOUTH TRIMBLE, 

Clerk. 



APPENDIX E 



63d COXGKESS, q a 71 a 
3d Session. 0« O / 1 J* 



IX THE SENATE OF THE UNITED STATES. 

December 7, 1914. 

Mr. Jones introduced the folloAving bill, which Avas read twice 

and referred to the Committee on Public Lands. 



A BILL 

To aid and to regulate the development, operation, and main- 
tenance of water powers on lands of the United States, and 
for other purposes. 

1 Be it enacted by the Senate and House of Representa- 

2 tires of the United States of America in Congress assembled, 

3 That in order to utilize for the benefit of the public the 
1 water-power resources dependent in whole or in part for 

5 their proper development upon the use of public lands of 

6 the United States (including Alaska), and in order to 

7 prevent the unregulated monopoly of said water powers, and 

8 for the purpose of developing, generating, transmitting, 

9 and utilizing hydroelectric power, the right to construct, 

i 12) 



2 

1 develop, maintain, and operate dams, reservoirs, canals, con- 

2 duits, pipe lines, tunnels, water-power or hydroelectric plants, 

3 transmission and distributing lines, and all other appurtenant 

4 constructions, structures, and appliances necessary or con- 

5 venient for the development, generation, transmission, and 

6 utilization of hydroelectric power on, over, under, and 

7 across any part of the public lands of the United States 

8 (including Alaska), reserved or unreserved, including na- 

9 tional forests, national monuments, and Indian reservations, 

10 is hereby granted, upon compliance with the conditions here- 

11 inafter imposed, to any State or municipal subdivision 

12 thereof or to any mutual or public-service corporation or- 

13 ganized for the purpose, or to any person or persons author- 

14 ized by the State or States in which any portion of such 

15 dam, storage reservoir, water-power or hydroelectric plant, 

16 or transmission or distributing lines may be located, to 

17 engage in the business of furnishing water for domestic uses, 

18 irrigation, transportation, or any other purpose, or light, 

19 heat, power, or energy generated by electricity or other - 

20 wise: Provided, That the State in which such lands may be 

21 located shall have provided for the regulation and control of 

22 mutual and public-service corporations and persons engag- 

23 ing in such business. Such State, municipal subdivision, 

24 mutual or public-service corporation, person or persons is 

25 hereinafter referred to as the "grantee." 



1 Sec. 2. That any grantee hereunder may construct, 

2 develop, maintain, and operate dams, reservoirs, canals, 

3 conduits, pipe lines, tunnels, water-power or hydroelectric 

4 plants, transmission and distributing lines, and all other ap- 

5 purtenant structures and appliances on, over, under, and 

6 across any part of the public lands of the United States (in- 

7 eluding Alaska), reserved or unreserved, including national 

8 forests, national monuments, and Indian reservations, upon 

9 filing with the Secretary of the department having jurisdic- 

10 tion over such lands proof of its right to the use of water 

11 and plans and specifications for such works, together with 

12 such drawings of the proposed construction and such map of 

13 the proposed location and flooded area as may be required 

14 for a full understanding of the subject, which plans, speci- 

15 fications and drawings shall be approved by such Secretary 

16 if it appears to him that the proposed development will pro- 

17 mote the highest and greatest practicable use of the water 

18 resources involved. Within ninety days after the approval 

19 of such plans, specifications, and drawings said grantee and 

20 isuch Secretary shall agree upon the then fair market value 

21 of the lands proposed to be occupied which are owned or 

22 controlled by the United States, and in the event of their 

23 failure to agree within such time, then such grantee shall 

24 have the right to, and may, begin proceedings in the dis- 

25 trict court of the United States for the district in which 



4 

1 such lands or any part thereof may be located for the 

2 purpose of determining the then fair market value thereof. 

3 Such district court is hereby given jurisdiction of said pro- 

4 ceedings for such purpose, and service of process may 

5 be had upon the clerk of said court, and upon such 

6 service being made the Attorney General of the United 

7 States shall enter his appearance for the United States. 

8 Such proceedings shall be conducted according to the laws 

9 and rules in force in said jurisdiction at said time for the 

10 exercise of the right of eminent domain for public pur- 

11 poses, with the right of appeal as in other cases. Upon 

12 an agreement being reached as to the fair market value 

13 of said land between said Secretary and the grantee, or 

14 in the event of their failure to agree, then upon the 

15 final adjudication of the value of said land the grantee 

16 shall have the right to occupy the same for the pur- 

17 poses above set forth for a period of fifty years after 

18 such agreement or final adjudication, and after the expira- 

19 tion of said period of fifty years such right shall continue 

20 until terminated and compensation has been made to the 

21 grantee for the fair value of its property, as herein pro- 

22 vided. During the occupancy of said land by the grantee 

23 it shall pay into the Treasury of the United States an- 

24 nually, in advance, a sum equal to ^ve per centum 

25 upon the fair market value of such land as so deter- 



5 

1 mined by agreement or final adjudication, and the lia- 

2 bility for such payment shall constitute a preferred claim 

3 against all the assets of the grantee and may be collected by 
1 suit brought in the name of the United States, and in the 

5 event of the failure of the grantee to pay any judgment and 

6 costs recovered in such suit, then such judgment may provide 

7 for ejecting said grantee from said premises and for the 

8 forfeiture of the grant. 

9 Sec. 3. That in the acquisition of the property of the 

10 grantee, as hereinafter provided, no value shall be claimed 

11 by or allowed to the grantee for the use of or the right to 

12 use the lands acquired under the terms of this Act. 

13 Sec. 4. That where the public interest requires or jus- 
11 tifies the execution by the grantee of contracts for the sale 

15 and delivery of electrical energy for periods extending be- 

16 yond the fifty-year period herein named, such contracts may 
IT be entered into upon the approval of the Public Service Com- 

18 mission or similar authority in the State in which the sale 

19 or delivery of power is made, or if sold or delivered in a 

20 Territory, then upon the approval of the authority under 

21 which the grant is made, and thereafter, in the event of the 

22 termination of the grant as herein provided, the United States 

23 or any subsequent grantee shall assume and fulfill all such 
21 contracts entered into by the original grantee. 



6 

1 Sec. 5. That Congress may, at any time, provide for 

2 the termination of the right to occupy such land upon the 

3 expiration of said fifty-year period, or at any time there- 

4 after, and provide for the disposition of all the property of 

5 the grantee dependent for its success upon the rights hereby 

6 granted, which shall include the necessary appurtenant prop- 

7 erty created or acquired and valuable or serviceable in the 

8 distribution of water or in the generation, transmission, or 

9 distribution of light, heat, power, or energy, upon the pay- 

10 ment of fair compensation and upon the assumption of all 

11 contracts entered into by said grantee which have the ap- 

12 proval of the duly constituted public authority having juris- 

13 diction thereof. 

14 Sec. 6. That in order to prevent tying up, for specu- 

15 lative purposes, any of the lands to be acquired under this 

16 Act, the grantee shall commence the construction of the 

17 project within two years from the date of the agreement, or 

18 in the event of failure to agree then upon the date of final 

19 adjudication, as to the value of the land to be occupied, 

20 and shall thereafter, in good faith, continuously, and with 

21 due diligence, prosecute such construction, and shall within 

22 the further term of five years complete and put in commer- 

23 cial operation such part of the ultimate development as the 

24 Secretary or Secretaries of the department or departments 

25 then having jurisdiction over such lands shall deem necessary 



7 

1 to supply the reasonable needs of the then available market, 

2 and shall from time to time thereafter construct such por- 

3 tion of the balance of such ultimate development as said 

4 Secretary or Secretaries may direct and within the time 

5 specified by said Secretary or Secretaries, so as to supply 

6 adequately the reasonable market demands until such ulti- 

7 mate development shall be completed, and no extensions of 

8 the periods herein specified shall be granted except by the 

9 President, and then only when, in his judgment, the public 

10 interest will be promoted thereby. 

11 Sec. 7. That rates charged by all grantees under this 

12 Act shall be reasonable and the service and operation shall 

13 be adequate and efficient, and all such grantees shall be 

14 subject to lawful regulation in the public interest as to 

15 rates and otherwise by the respective States having juris- 

16 diction thereof: Provided, however, That the United States 

17 reserves the right to regulate rates and service to the con- 

18 sumer to the extent that the business of the grantee may be 

19 or shall become interstate. 

20 Sec. 8. That the provisions of this Act shall apply to 

21 all grantees herein designated who, under existing laws or 

22 by the terms of an agreement or agreements heretofore 

23 entered into with the Department of the Interior or the 

24 Department of Agriculture, may have constructed, or have 

25 under construction, dams, reservoirs, canals, conduits, pipe 



1 lines, tunnels, water-power or hydroelectric plants, trans- 

2 mission or distributing lines, and appurtenant structures and 

3 appliances, on, over, under, or across any part of the public 

4 lands of the United States, reserved or unreserved, as defined 

5 in section one of this Act, and said grantee shall have the 

6 right to have the then fair market value of the lands so occu- 

7 pied and used determined, as in said section two provided, 

8 and shall thereupon be entitled to all the rights, privileges, 

9 and benefits of this Act, and subject to its terms and pro- 

10 visions. Upon a determination of the fair market value of 

11 said land, by and between the Secretary of the department 

12 having jurisdiction over such lands and the grantee, or, in 

13 the event of their failure to agree, then upon the final adjudi- 

14 cation of the value of said lands, as provided in section two 

15 of this Act, and upon such modification of its plans and speci- 

16 fixations for development as the Secretary may deem neces- 

17 sary to promote by such proposed development the highest 

18 and greatest practical use of the water resources involved, 

19 such grantee shall have the right to ask, demand, and receive 

20 the cancellation of any and all agreements theretofore made 

21 with the Department of the Interior or the Department of 

22 Agriculture having reference to any of the rights of way or 

23 lands of the United States so occupied or used, and upon 

24 the payment by said grantee into the Treasury of the United 

25 States of the first annual payment for the use of said lands, 



9 

1 as herein provided, all such agreement or agreements shall 

2 be canceled and annulled and be of no further force or effect. 

3 Sec. 9. That all water-power reserves may be opened 

4 by the President to location, settlement, entry, and disposal 

5 under the appropriate public-land laws, so far as the same 

6 will not impair, prejudice, or destroy the use of the land for 

7 water-power development, generation, transmission, or 

8 utilization, it being the intent of this section that so far as 

9 possible lands available and necessary for water power and 

10 for other purposes shall be used for all purposes, the water 

11 poAver, however, being the dominant use, which reservation 

12 shall be expressed in all patents issued for such land. 

13 Sec. 10. That the works constructed and maintained 
11 under authority of this Act shall not be owned, leased, 

15 trusteed, possessed, or controlled by any device or in any 

16 manner so that they form a part of or in any way affect any 
IT combination in the form of an unlawful trust, or form the 

18 subject of any contract or conspiracy to limit the output of 

19 electric energy or in restraint of trade with foreign nations 

20 or between two or more States or Territories in the genera- 

21 tion, sale, or distribution of electric energy. 

22 Sec. 11. That any grant made hereunder may be 

23 forfeited and canceled before the expiration of the fifty-year 

24 period herein named, by appropriate proceedings in a court 

S. 6712 2 



10 

1 of competent jurisdiction, whenever the grantee shall fail to 

2 comply with the terms of this Act. 

3 Sec. 12. That the Secretary having control and juris- 

4 diction over any lands subject to the provisions of this Act 

5 may make such rules and regulations as may be necessary 

6 and proper for the purpose of carrying out the provisions 

7 of this Act in relation to the lands under his control and 

8 jurisdiction. 

9 Sec. 13. That the provisions of section one of this Act 

10 defining the qualifications necessary for a grantee hereunder 

11 shall not apply to any water-power developments or pro- 

12 posals for development of a capacity of one thousand horse- 

13 power or less, and in such cases the benefits of this Act shall 

14 extend to any person, corporation, or association of persons 

15 which shall comply with the other terms and requirements 

16 hereof. 

17 Sec. 14. That all Acts and parts of Acts inconsistent 

18 with this Act are hereby repealed, and the right to alter, 

19 amend, or repeal this Act is hereby expressly reserved : 

20 Provided, That in case any grantee hereunder shall, at the 

21 time of such alteration, amendment, or repeal, have exercised 

22 rights in accordance with this Act, such rights and property 

23 used thereunder shall be deemed property rights of such 

24 grantee, of which such grantee shall not until the time herein 



11 

1 fixed for termination be deprived by such alteration, ainend- 

2 ment, or repeal, and then only upon the conditions provided 

3 in case of termination by section five of this Act. 



APPENDIX F 



63d congkess, ^ T A T 1 
3d Session. 0« / \) i I 



IN THE SENATE OF THE UNITED STATES. 

December 29, 1914. 

Mr. Works introduced the following bill; which was read twice 

and referred to the Committee on Public Lands. 



A BILL 

To provide for the disposition of the public lands for the supply 
of water for irrigation and the generation of power. 

1 Be it enacted by the Senate and House of Representa- 

2 tives of the United States of America in Congress assembled, 

3 That subject to the limitation and provisions in this Act 

4 contained, the right of way is hereby granted to construct, 

5 develop, maintain, and operate all necessary or convenient 

6 dams, reservoirs, canals, conduits, pipe lines, tunnels, trans- 

7 mission lines, roads, power houses, and all other works or 

8 structures necessary or convenient for the appropriation and 

9 beneficial use of water and the power or other products 

10 generated thereby and for the utilization and beneficial use 

11 of the same on, over, under, and across any part of the 



2 

1 public lands of the United States (including Alaska) re- 

2 served or unreserved, including national forests, national 

3 monuments, and Indian reservations, to any State or munici- 

4 pal subdivision thereof, or to any mutual or public-service 

5 corporation organized for the purpose or to any person or 

6 persons authorized by the State or States in which any 

7 portion of such works, structures, or appurtenances are situ- 

8 ated: Provided, That as to any such rights or uses that are 

9 located within any national monuments or Indian reserva- 

10 tions the same shall be located subject to the approval of and 

11 under the direction of the Secretary of the Interior, and in 

12 such a way as not to interfere with said national monuments 

13 or Indian reservations or the uses or purposes for which the 

14 same are created. 

15 Sec. 2. That any applicant for a grant hereunder may 

16 file with the Secretary of the Interior, or of the department 

17 having jurisdiction of such lands, proof of his right to the 

18 appropriation or use of water, together with plans and speci- 

19 fications for such works, together with such maps and draw- 

20 ings of the proposed canals, works, reservoirs, and other 

21 structures as may be required for the full understanding of 

22 the same, which plans and specifications and drawings shall 

23 be approved by the Secretary, subject to the laws of the 

24 State with respect to and controlling the appropriation and 

25 beneficial use of water for the purposes for which the same 



3 

1 is being appropriated. If said proposed canals, works, 

2 reservoirs, or other structures are located within any national 

3 monument or Indian reservation, no work upon or in con- 

4 nection therewith shall be commenced or proceeded with 

5 until the location of the same is approved by the Secretary 

6 of the department having jurisdiction thereof, as herein- 

7 before in this Act provided, and, if within a forest reserve, 

8 may be required to be so located as not unnecessarily to 

9 interfere with the purposes for which such reserve is created : 

10 Provided, That no grant shall be made under this Act until 

11 the applicant shall have obtained and filed with the officer 

12 to whom the application is made a certificate from the State 

13 board, commission, or other body or officer having jurisdic- 

14 tion over the use of the waters of the streams of the State 

15 that such applicant has the lawful right to divert and use the 

16 water for the purpose or purposes for which the applica- 

17 tion is made. If no such body or officer exists in any State, 

18 then the officer to whom such application is made shall, in 

19 case of conflict, make the grant to the person having the 

20 legal right to the use of the water: Provided further, That 

21 within ninety days after the approval of such plans, speci- 

22 fixations, and drawings said grantee and said Secretary shall 

23 agree upon the then fair market value of the lands proposed 

24 to be occupied or used and which are owned or controlled 

25 by the United States; and, in the event of their failure to 



4 

1 agree within such time, then such grantee shall have the 

2 right to and may bring proceedings in the district court of 

3 the United States for the district in which such lands are 

4 situated, or in which any part thereof may be located, for 

5 the purpose of determining the then fair market value 

6 thereof. Such district court is hereby given jurisdiction of 

7 such proceedings for such purpose and service of process may 

8 be had on the clerk of said court, and, upon service being 

9 made and within thirty days thereafter, the Attorney General 

10 of the United States shall enter his appearance for the 

11 United States. Such proceedings shall be conducted ac- 

12 cording to the laws and rules in force in such jurisdiction 

13 at such time for the exercise of the right of eminent domain 

14 for public purposes, with the right of appeal as in other 

15 cases. Upon an agreement being reached as to the fair 

16 market value of said land between said Secretary and the 

17 grantee, or, in the event of failure so to agree, then upon 

18 the bringing of such action in said court of the United States 

19 and upon the giving of a sufficient bond by the grantee, 

20 required and conditioned upon his complying with the order 

21 and judgment of the court and approved by the court, or 

22 upon the final adjudication of the value of said land, the 

23 grantee shall have the right to occupy the same for the 

24 purposes above set forth so long as and during such period 

25 or periods of time thereafter as the said grantee, its sue- 



1 cessors or assigns, shall be possessed of the right of appro- 

2 priation and beneficial nse of the waters appropriated and 

3 used in connection with said rights of way: And provided 

4 further, That if, and whenever, the right of appropriation 

5 and beneficial nse of said waters and the right to nse and 

6 enjoy the products thereof shall be assigned, transferred, 

7 conveyed, forfeited to, or vested in any other corporation or 

8 person or State or municipal subdivision thereof, then and 

9 thereupon the rights of way and all of the rights and privi- 

10 leges hereby granted to the grantee shall belong to and shall 

11 be vested in such successor in interest or right of the grantee 

12 or its successors or assigns, so that said right of way shall 

13 continue with, appertain to, and shall be used and enjoyed 

14 only by the grantee or its successors in interest, or in any 

15 State or municipal subdivision thereof having the right or 

16 being charged with the duty of appropriation and beneficial 

17 use of the Avaters diverted and used in connection with the 

18 rights of way so granted, and having the right to engage in 

19 and being charged with the duty of carrying on the service 

20 connected with the appropriation and beneficial use of said 

21 water or the electric power or products generated thereby 

22 or produced therefrom. 

23 Sec. 3. That in arriving at the fair market value of 

24 such land the parties, or, in case of disagreement, the court, 

25 shall take into account the enhanced value of said land for 

(13) 



6 

1 power plant or reservoir or other special purpose or 

2 purposes. 

3 Sec. 4. That in the event of the acquisition of the 

4 property of the grantee, including or connected with the 

5 rights and privileges obtained under this Act. under the 

6 authority of the United States, or by or under the authority 

7 of any State or municipal subdivision thereof, the grantee 

8 shall not be entitled to claim or receive any compensation 

9 or value or in connection with any of the rights obtained or 

10 used under the provisions of this Act. And the grantee 

11 and its successors in interest shall not be entitled, in the 

12 fixing of any rates by competent public authority, or by 

13 any State or legal subdivision thereof, to have or receive 

14 any allowance or earnings on account of any of the rights, 

15 uses, or privileges granted or received under this Act, 

16 except such amounts, if any, as have been paid for the uses 

17 and privileges hereby granted and allowed. 

18 Sec. 5. That the grantee shall commence the construc- 

19 tion of the proposed works within one year from the date 

20 of the agreement or final adjudication, or the approval of 

21 the bond, as in this Act provided for. and shall thereafter, 

22 in good faith, continuously and with due diligence prosecute 

23 such construction, and shall within the further term of Aye 

24 years complete and put in commercial operation such de- 

25 velopment or such substantial part or portion thereof, as 



7 

1 the public needs shall demand, and shall complete and put 

2 in operation said entire development with due and reason- 

3 able diligence: Provided, That the rights of such grantee, 

4 its successors or assigns, shall not be forfeited or terminated 

5 so long as the grantee, his successors or assigns, remain 

6 vested with the right or duty to appropriate and beneficially 

7 use the waters or products thereof to be appropriated and 

8 used upon or in connection with said rights of way and 

9 shall be duly and reasonably exercising that right and duty : 

10 Provided, however, That whenever the rights of the grantee, 

11 its successors or assigns, are lost, forfeited, or transferred 

12 so that the water or the products thereof can not be appro- 

13 priated or used upon or in connection with said rights of 

14 way, then and thereupon such rights of Avay or the parts or 

15 portions thereof which can not be so used or enjoyed shall 

16 revert to and be revested in the Government of the United 
IT States, or in the successor in interest of the said grantee 

18 entitled to and having the right to appropriate or bene- 

19 ficially use said waters or the products thereof: Pro- 

20 vided further, That whenever the right to use the waters 

21 of the stream for the purposes of the grant shall be forfeited 

22 or otherwise terminated by the State wherein the land is 

23 situated or by final adjudication of the courts, then all the 

24 rights under the grant shall cease and terminate and the 

25 land revert to the United States. 



1 Sec. 6. That the rates and service of the grantee, its 

2 successors and assigns, shall be subject to regulation and 

3 control under the Constitution and laws of the United States 

4 and under the constitution and laws of the State or States 

5 within which the same are situated or used, and, in the 

6 event of forfeiture of any of the rights, privileges, or prop- 

7 erties of the grantee, its successors or assigns, by reason or on 

8 account of the violation of any laAV of the United States or 

9 of any State, the rights hereby granted shall be forfeited 

10 therewith and shall revert to or be vested in the State or 

11 States, or municipal subdivisions thereof, or corporations or 

12 person or persons in whom the right or duty of appropria- 

13 tion and beneficial use of said waters or the products thereof 

14 shall be vested, and, in such event, without compensation to 

15 the grantee, its successors, or assigns, for or in connection 

16 with any of the rights, uses, or privileges obtained, granted, 

17 or received under this Act. 

18 Sec. 7. That rates and charges for power, or Avater 

19 furnished for irrigation or other use, shall be fixed and de- 

20 termined by the State in which the same is supplied : Pro- 

21 vicled, That where the power plant or reservoir site acquired 

22 under this Act is in one State and power or water is supplied 

23 in another State any person supplied therewith in the latter 

24 State may apply to the Interstate Commerce Commission, 



1 or other body authorized by Act of Congress, to fix such 

2 rates and charges for power or water supplied in such State. 

3 Sec. 8. That any qualified grantee or grantees under 

4 the terms of this Act engaged in the appropriation and 

5 beneficial use of water or the products thereof, as in this Act 

6 set forth under revocable permits or otherwise may come 

7 under and avail themselves of the privileges of this Act 

8 upon application to the head of the department having juris- 

9 diction of the administration of this Act and, upon such 

10 application and the filing of the required plans, specifica- 

11 tions, maps, and other data required, such qualified grantee 

12 shall come under and have and enjoy and be subject to all 

13 of the terms, rights, grants, conditions, limitations, and pro- 

14 visions of this Act, upon compliance with its terms, as herein 

15 provided: Provided, That if any of its works or structures 

16 are in course of construction, or completion, at the time of 

17 so coining under the provisions of this Act, the same shall 

18 be considered completed, used, operated, and enjoyed wholly 

19 under and in accordance with the terms and provisions and 

20 limitations of this Act and as though originally authorized, 

21 granted, and constructed hereunder, and such grantee shall 

22 and may have the value of the rights and properties used 

23 and enjoyed under the terms of this Act agreed upon or 

24 adjudicated and valued as in this Act provided, and there- 

S. 7071 2 



10 

1 after shall make payments to the Government of the United 

2 States in accordance with the terms of this Act: Provided, 

3 also, That in the event of the rights and privileges of the 

4 grantee in connection with any existing uses or permits being 

5 brought under this Act, thereupon and in connection there- 

6 with all of the other existing permits, rights, privileges, or 

7 claims of the grantee as to the rights and property so brought 

8 under this Act shall be surrendered, canceled, nullified, and 

9 at an end, and the sole rights of the United States and the 

10 grantee as to such property shall be under and in accordance 

11 with this Act. 

12 Sec. 9. That the Secretary of the Interior, or other 

13 Secretary having jurisdiction and control over any lands sub- 

14 ject to the provisions of this Act, shall make such rules and 

15 regulations as may be necessary and appropriate and for the 

16 purposes of and having the effect of carrying out the provi- 

17 sions of this Act. 

18 Sec. 10. That the rights and privileges herein granted 

19 may be transferred, assigned, conveyed, mortgaged, or 

20 otherwise disposed of by the grantee, but only under and in 

21 accordance with and subject to the provisions of this Act 

22 and under and in accordance with the laws of the United 

23 States and of any State or States Avithin which such said 

24 works are situated and any assignee or successor in interest 



11 

1 of the grantee hereunder shall be subject to all of the terms 

2 and conditions of this Act and to the laws of the United 

3 States and of the State or States within which said property 

4 or works are situated in all respects and to the same extent 

5 as the original grantee hereunder. 

6 Sec. 11. That the United States shall at all times have 

7 the right to reserve, sell, assign, lease, transfer, or otherwise 

8 dispose of all or any part of the lands or the products thereof 

9 upon, over, or in connection with which the rights, privi- 

10 leges, structures, and uses hereunder provided for are situ- 

11 ated, subject to all of the rights of way, uses, occupancies, 

12 and privileges hereunder granted, including the right to all 

13 necessary means of ingress and egress used or reasonably 

14 required in the use and enjoyment of the rights and privileges 

15 granted hereunder. 

16 Sec. 12. That nothing in this Act shall be construed 

17 as affecting or intended to affect, or to in any way interfere 

18 with the laws of any State relating to the control, appropri- 

19 ation, use. or distribution of water. 

20 Sec. 13. That all Acts and parts of Acts inconsistent 

21 with this Act are hereby repealed, and the right to alter, 

22 amend, or repeal this Act is hereby expressly reserved: 

23 Provided. That in case any grantee hereunder shall, at the 

24 time of such alteration, amendment, or repeal, have exercised 

25 rights in accordance with this Act, such rights and property 



12 

1 used thereunder shall be deemed property rights of such 

2 grantee, of which such grantee shall not be deprived by such 

3 alteration, amendment, or repeal, and only upon the con- 

4 ditions provided in this Act. 



APPENDIX G 



63d CONGKESS, ^ -|A| 
3d Session. O* / I U I 



IN THE SENATE OF THE UNITED STATES. 

December 29 (calendar day, December 31), 1914. 

Mr. Smoot introduced the following bill; which was read twice 

and referred to the Committee on Public Lands. 



A BILL 

Providing for the acquisition by a State, under certain conditions, 
of any lands therein which are or may become chiefly valu- 
able for the development of water power. 

1 Be it enacted by the Senate and House of Representa- 

2 fives of the United States of America in Congress assembled, 

3 That in the manner and subject to the limitations herein pre- 
1 scribed, a State may enter and acquire title to lands within 

5 said State which are or may become chiefly valuable for the 

6 development of water power. 

7 Sec. 2. That any State desiring to avail itself of the pro- 

8 visions of this act shall make application therefor in the 

9 manner following: 



2 

1 Such State shall, through its regularly created board, 

2 commission, or other regularly constituted public authority 

3 of said State duly vested with the power to regulate and 

4 control the rates and service of public utility corporations, 

5 including authority to regulate the rates and iservice of any 

6 person, persons, associations, or corporations engaged in 

7 the business of developing, distributing, furnishing, selling, 

8 and renting electric power, file with the Secretary of the 

9 Interior an application setting forth the description of the 

10 lands sought to be acquired, accompanied by a map or plat 

11 thereof, together with proof that the lands described are 

12 chiefly valuable for the development of water power, that 

13 the entire area of the land described is necessary to accom- 

14 plish development of the largest available power at the 

15 place designated, and that said application is made for the 

16 development of water power in accordance with the pro- 

17 visions of this Act. 

18 Sec. 3. That such State shall submit proof with such 

19 application establishing that the lands described are chiefly 

20 valuable for the development of water power and are neces- 

21 sary therefor and are being sought for that purpose, and upon 

22 such matters and facts being established, patent therefor or 

23 for such portion thereof as is necessary for the purpose afore- 

24 said shall issue as hereinbefore provided to such State. Such 

25 patent shall include such lands or all portions thereof as are 



3 

L chiefly valuable for the development of water power and are 

2 necessary therefor, including all necessary or convenient 

3 dams, reservoirs, canals, conduits, pipe lines, tunnels, trans- 

4 mission lines, roads, power houses, and all other works or 

5 structures necessary or convenient for the appropriation and 

6 beneficial use of water and the power or other products gen- 

7 erated thereby and for the utilization and beneficial use of the 

8 same. 

9 Sec. 4. That the provisions of this Act, where appli- 

10 cation is made by the duly constituted authority of the 

11 State, as hereinbefore set forth, shall apply to any part of 

12 the public lands of the United States, reserved or unre- 

13 served, including national forests, national monuments, and 

14 Indian reservations: Provided, That where such lands are 

15 located Avithin any national monuments or Indian reserva- 
1G tions, the same shall be located under the direction of the 

17 Secretary of the Interior and in such a way as not to inter- 

18 fere with such national monuments or Indian reservations 

19 or the uses or purposes for which the same are created. 

20 Sec. 5. That such patent issued under the provisions of 

21 this Act shall contain and be subject to the following con- 

22 ditions, limitations, and restrictions, to wit : 

23 First. That said State or Territory shall not alienate 

24 the fee simple title to said lands and shall retain the same 

25 for the uses and purposes in this Act set forth, granting 



4 

1 the use thereof for such purposes and subject to the laws 

2 of said State and the United States applicable to and adopted 

3 for the purpose of controlling and regulating such business 
1 and the charges and services thereof so that the State, or 

5 those authorized under its laws to appropriate and bene- 

6 ficially use such waters, will carry on and continue the 

7 service of generating and distributing such electric power. 

8 Second. That each tract of land so patented shall be 

9 held by said State and devoted primarily to the development 

10 of water power either by said State or Territory or by a 

11 municipal corporation or corporations therein or by some 

12 person or persons, association or associations, corporation or 

13 corporations thereto duly authorized and that said State or 
11 Territory shall not devote or permit the same to be devoted 

15 to any other purpose or purposes in conflict therewith. 

16 Third. That all power generated, sold, rented, or dis- 

17 tributed under authority of said State by any person or per- 

18 sons, association or associations, corporation or corporations, 

19 and the rates therefor and the service therefor shall at all 

20 times be subject to and shall be regulated and fixed by and 

21 under the authority and laws of said State, or in cases in- 

22 volving interstate commerce under and pursuant to the laws 

23 of the United States, and that such power so generated shall 
21 never be the subject of any combination or consolidation in 



5 

1 restraint of trade contrary to or in violation of any law of 

2 said State or applicable law of the United States. 

3 Fourth. That none of the properties, rights, uses, or 

4 privileges patented under the provisions of this Act, where 

5 the same are assigned or transferred to or permitted to be 

6 used or enjoyed under the provisions of this Act, shall ever 

7 be valued or allowed to be charged for in connection with 

8 any service to the public in excess of such amounts, if any, 

9 as the person or persons, association or associations, corpora- 

10 tion or corporations shall have actually paid for the same, 

11 and in the event of the acquisition of such property, rights, 

12 uses, or privileges by such State or any municipality or sub- 

13 division thereof, no amount whatever shall be allowed or 

14 paid by said State, municipality, or subdivision thereof for 

15 such transfer or acquisition in excess of such amounts, if 

16 any, as shall have been paid therefor and which shall not 

17 have been repaid or reimbursed prior to such acquisition 

18 of the same. 

19 Sec. 6. That upon any sale or disposition or attempted 

20 sale or disposition of such lands by any State for any other 

21 purpose or in any other manner than as herein provided, or 

22 upon failure to require said lands to be devoted to the uses 

23 required by this Act, or upon any violation of the provisions 

24 of this Act, or of the patent to be issued hereunder, the same 

25 shall be forfeited to the United States, and the Attorney 



6 

1 General, upon the direction of the President of the United 

2 States, is authorized to institute such judicial proceedings as 

3 may be necessary for the purpose of ascertaining, declaring, 

4 and enforcing such forfeiture. 

5 Sec. 7. That the Secretary of the Interior shall make 

6 such rules and regulations as may be necessary and appro- 

7 priate for the purpose of and having the effect of carrying 

8 out the provisions of this act. 

9 Sec. 8. That nothing in this act contained shall be con- 

10 strued as affecting or intended to affect or to in any way 

11 interfere with the laws of said State relating to the control, 

12 appropriation, use, or disposition of water or the right or 

13 priority of right to the use of the same now or hereafter 

14 vested under and in accordance with the laws of said State. 



